Stock Analysis

Ujjivan Financial Services Limited (NSE:UJJIVAN) Analysts Just Cut Their EPS Forecasts

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Today is shaping up negative for Ujjivan Financial Services Limited (NSE:UJJIVAN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Ujjivan Financial Services' three analysts is for revenues of ₹21b in 2022, which would reflect a credible 3.2% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 72% to ₹8.03. Before this latest update, the analysts had been forecasting revenues of ₹25b and earnings per share (EPS) of ₹28.79 in 2022. So we can see that the consensus has become notably more bearish on Ujjivan Financial Services' outlook with these numbers, making a measurable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

Check out our latest analysis for Ujjivan Financial Services

NSEI:UJJIVAN Earnings and Revenue Growth August 15th 2021

The consensus price target fell 9.5% to ₹279, implicitly signalling that lower earnings per share are a leading indicator for Ujjivan Financial Services' valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Ujjivan Financial Services at ₹345 per share, while the most bearish prices it at ₹240. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Ujjivan Financial Services shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Ujjivan Financial Services' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 4.4% growth on an annualised basis. This is compared to a historical growth rate of 26% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 20% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Ujjivan Financial Services.

The Bottom Line

The most important thing to take away is that analysts are expecting Ujjivan Financial Services to become unprofitable this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Ujjivan Financial Services' revenues are expected to grow 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Ujjivan Financial Services analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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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