Stock Analysis

Earnings Miss: SBI Cards and Payment Services Limited Missed EPS By 15% And Analysts Are Revising Their Forecasts

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Shareholders might have noticed that SBI Cards and Payment Services Limited (NSE:SBICARD) filed its third-quarter result this time last week. The early response was not positive, with shares down 7.0% to ₹715 in the past week. Revenues were in line with forecasts, at ₹32b, although statutory earnings per share came in 15% below what the analysts expected, at ₹5.36 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for SBI Cards and Payment Services

NSEI:SBICARD Earnings and Revenue Growth January 26th 2023

Following the latest results, SBI Cards and Payment Services' 20 analysts are now forecasting revenues of ₹156.2b in 2024. This would be a sizeable 28% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 22% to ₹28.85. In the lead-up to this report, the analysts had been modelling revenues of ₹159.4b and earnings per share (EPS) of ₹31.48 in 2024. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

The consensus price target fell 8.0% to ₹936, with the weaker earnings outlook clearly leading valuation estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on SBI Cards and Payment Services, with the most bullish analyst valuing it at ₹1,117 and the most bearish at ₹684 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that SBI Cards and Payment Services' rate of growth is expected to accelerate meaningfully, with the forecast 22% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 18% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 21% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that SBI Cards and Payment Services is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on SBI Cards and Payment Services. Long-term earnings power is much more important than next year's profits. We have forecasts for SBI Cards and Payment Services going out to 2025, and you can see them free on our platform here.

You still need to take note of risks, for example - SBI Cards and Payment Services has 2 warning signs (and 1 which is concerning) we think you should know about.

Valuation is complex, but we're helping make it simple.

Find out whether SBI Cards and Payment Services is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.