News Flash: 3 Analysts Think Spandana Sphoorty Financial Limited (NSE:SPANDANA) Earnings Are Under Threat

The latest analyst coverage could presage a bad day for Spandana Sphoorty Financial Limited (NSE:SPANDANA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from Spandana Sphoorty Financial's three analysts is for revenues of ₹10b in 2022, which would reflect a small 6.9% decline in sales compared to the last year of performance. Statutory earnings per share are presumed to jump 420% to ₹12.40. Before this latest update, the analysts had been forecasting revenues of ₹12b and earnings per share (EPS) of ₹53.10 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Spandana Sphoorty Financial

It'll come as no surprise then, to learn that the analysts have cut their price target 17% to ₹610. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Spandana Sphoorty Financial analyst has a price target of ₹810 per share, while the most pessimistic values it at ₹460. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Spandana Sphoorty Financial's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 13% by the end of 2022. This indicates a significant reduction from annual growth of 21% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 21% annually for the foreseeable future. It's pretty clear that Spandana Sphoorty Financial's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Spandana Sphoorty Financial. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

That said, the analysts might have good reason to be negative on Spandana Sphoorty Financial, given its declining profit margins. For more information, you can click here to discover this and the 2 other warning signs we've identified.

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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.