New Forecasts: Here's What Analysts Think The Future Holds For Indian Oil Corporation Limited (NSE:IOC)

By
Simply Wall St
Published
May 24, 2021
NSEI:IOC
Source: Shutterstock

Indian Oil Corporation Limited (NSE:IOC) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investor sentiment seems to be improving too, with the share price up 7.3% to ₹109 over the past 7 days. Could this big upgrade push the stock even higher?

After this upgrade, Indian Oil's 14 analysts are now forecasting revenues of ₹5.3t in 2022. This would be a huge 45% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to plunge 33% to ₹15.85 in the same period. Prior to this update, the analysts had been forecasting revenues of ₹4.8t and earnings per share (EPS) of ₹13.65 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Check out our latest analysis for Indian Oil

earnings-and-revenue-growth
NSEI:IOC Earnings and Revenue Growth May 25th 2021

Despite these upgrades, the analysts have not made any major changes to their price target of ₹130, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Indian Oil, with the most bullish analyst valuing it at ₹175 and the most bearish at ₹85.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. The analysts are definitely expecting Indian Oil's growth to accelerate, with the forecast 45% annualised growth to the end of 2022 ranking favourably alongside historical growth of 1.4% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Indian Oil to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Indian Oil could be a good candidate for more research.

Analysts are definitely bullish on Indian Oil, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 2 other flags we've identified .

We also provide an overview of the Indian Oil Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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