Broker Revenue Forecasts For NATCO Pharma Limited (NSE:NATCOPHARM) Are Surging Higher

NATCO Pharma Limited (NSE:NATCOPHARM) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 4.9% to ₹711 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

After this upgrade, NATCO Pharma's ten analysts are now forecasting revenues of ₹33b in 2023. This would be a substantial 62% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 521% to ₹57.79. Before this latest update, the analysts had been forecasting revenues of ₹30b and earnings per share (EPS) of ₹56.06 in 2023. Sentiment certainly seems to have improved in recent times, with a substantial gain in revenue and a small increase to earnings per share estimates.

Check out our latest analysis for NATCO Pharma

As a result, it might be a surprise to see that the analysts have cut their price target 7.9% to ₹894, which could suggest the forecast improvement in performance is not expected to last. 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 NATCO Pharma, with the most bullish analyst valuing it at ₹1,060 and the most bearish at ₹855 per share. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that NATCO Pharma is forecast to grow faster in the future than it has in the past, with revenues expected to display 62% annualised growth until the end of 2023. If achieved, this would be a much better result than the 3.3% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 11% per year. Not only are NATCO Pharma's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at NATCO Pharma.

Better yet, our automated discounted cash flow calculation (DCF) suggests NATCO Pharma could be moderately undervalued. You can learn more about our valuation methodology 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.