The analysts covering Just Dial Limited (NSE:JUSTDIAL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. 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 consensus from seven analysts covering Just Dial is for revenues of ₹7.9b in 2022, implying a noticeable 4.8% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to decline 17% to ₹28.22 in the same period. Before this latest update, the analysts had been forecasting revenues of ₹8.9b and earnings per share (EPS) of ₹34.92 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.
Analysts made no major changes to their price target of ₹733, suggesting the downgrades are not expected to have a long-term impact on Just Dial's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Just Dial, with the most bullish analyst valuing it at ₹1,092 and the most bearish at ₹530 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Just Dial's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 4.8% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 3.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 15% annually for the foreseeable future. It's pretty clear that Just Dial's revenues are expected to perform substantially worse than the wider 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 Just Dial. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Just Dial after the downgrade.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Just Dial going out to 2025, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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