Downgrade: Here's How Analysts See Kaveri Seed Company Limited (NSE:KSCL) Performing In The Near Term

Market forces rained on the parade of Kaveri Seed Company Limited (NSE:KSCL) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the current consensus from Kaveri Seed's seven analysts is for revenues of ₹9.9b in 2022 which - if met - would reflect an okay 4.7% increase on its sales over the past 12 months. Per-share earnings are expected to accumulate 7.7% to ₹39.65. Before this latest update, the analysts had been forecasting revenues of ₹12b and earnings per share (EPS) of ₹58.50 in 2022. Indeed, we can see that the analysts are a lot more bearish about Kaveri Seed's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Kaveri Seed

It'll come as no surprise then, to learn that the analysts have cut their price target 11% to ₹785. 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 Kaveri Seed, with the most bullish analyst valuing it at ₹1,067 and the most bearish at ₹601 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Kaveri Seed's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 6.3% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 7.4% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 10% per year. So although Kaveri Seed's revenue growth is expected to improve, it is still expected to grow slower than the 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 Kaveri Seed. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Kaveri Seed's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Kaveri Seed.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Kaveri Seed 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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