Finolex Industries Limited Recorded A 34% Miss On Revenue: Analysts Are Revisiting Their Models

It's been a sad week for Finolex Industries Limited (NSE:FINPIPE), who've watched their investment drop 12% to ₹170 in the week since the company reported its quarterly result. Revenues were ₹10b, 34% shy of what the analysts were expecting, although statutory earnings of ₹11.89 per share were roughly in line with what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Finolex Industries

Following last week's earnings report, Finolex Industries' five analysts are forecasting 2023 revenues to be ₹43.4b, approximately in line with the last 12 months. Statutory earnings per share are forecast to plunge 30% to ₹9.68 in the same period. In the lead-up to this report, the analysts had been modelling revenues of ₹43.7b and earnings per share (EPS) of ₹9.76 in 2023. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at ₹223. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Finolex Industries analyst has a price target of ₹300 per share, while the most pessimistic values it at ₹180. 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 Finolex Industries 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 Finolex Industries' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 0.7% growth on an annualised basis. This is compared to a historical growth rate of 9.1% 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 14% per year. Factoring in the forecast slowdown in growth, it seems obvious that Finolex Industries is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Finolex Industries' revenues are expected to perform worse than the wider industry. The consensus price target held steady at ₹223, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Finolex Industries. Long-term earnings power is much more important than next year's profits. We have forecasts for Finolex Industries going out to 2024, and you can see them free on our platform here.

Plus, you should also learn about the 3 warning signs we've spotted with Finolex Industries (including 1 which is a bit unpleasant) .

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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.