Spandana Sphoorty Financial Limited Just Beat Revenue Estimates By 7.7%

Spandana Sphoorty Financial Limited (NSE:SPANDANA) last week reported its latest first-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Results overall were respectable, with statutory earnings of ₹22.47 per share roughly in line with what the analysts had forecast. Revenues of ₹2.9b came in 7.7% ahead of analyst predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Spandana Sphoorty Financial

Taking into account the latest results, the consensus forecast from Spandana Sphoorty Financial's four analysts is for revenues of ₹11.8b in 2022, which would reflect a solid 8.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 164% to ₹57.47. Before this earnings report, the analysts had been forecasting revenues of ₹12.3b and earnings per share (EPS) of ₹58.80 in 2022. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.

Despite the cuts to forecast earnings, there was no real change to the ₹818 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 ₹860 per share, while the most pessimistic values it at ₹760. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Spandana Sphoorty Financial is an easy business to forecast or the the analysts are all using similar assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Spandana Sphoorty Financial's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 26% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 20% annually. Factoring in the forecast slowdown in growth, it seems obvious that Spandana Sphoorty Financial is also expected to grow slower than other industry participants.

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. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Spandana Sphoorty Financial analysts - going out to 2024, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Spandana Sphoorty Financial (1 can't be ignored!) that we have uncovered.

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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.
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