Aarti Drugs Limited Recorded A 9.0% Miss On Revenue: Analysts Are Revisiting Their Models

Last week, you might have seen that Aarti Drugs Limited (NSE:AARTIDRUGS) released its third-quarter result to the market. The early response was not positive, with shares down 3.2% to ₹401 in the past week. Results look mixed - while revenue fell marginally short of analyst estimates at ₹6.6b, statutory earnings were in line with expectations, at ₹22.12 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Aarti Drugs

Taking into account the latest results, the most recent consensus for Aarti Drugs from three analysts is for revenues of ₹30.4b in 2024 which, if met, would be a notable 14% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 55% to ₹27.67. Yet prior to the latest earnings, the analysts had been anticipated revenues of ₹33.0b and earnings per share (EPS) of ₹31.55 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.

It'll come as no surprise then, to learn that the analysts have cut their price target 8.0% to ₹473. 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. The most optimistic Aarti Drugs analyst has a price target of ₹547 per share, while the most pessimistic values it at ₹420. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Aarti Drugs is an easy business to forecast or the the analysts are all using similar assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Aarti Drugs' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 16% over the past five years. Compare this to the 147 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 11% per year. Factoring in the forecast slowdown in growth, it looks like Aarti Drugs is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Aarti Drugs. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Aarti Drugs' future valuation.

Following on from that line of thought, we think that 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 Aarti Drugs going out to 2025, and you can see them free on our platform here..

You still need to take note of risks, for example - Aarti Drugs has 1 warning sign we think you should be aware of.

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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.