Analysts Have Lowered Expectations For Tarsons Products Limited (NSE:TARSONS) After Its Latest Results

Tarsons Products Limited (NSE:TARSONS) shareholders are probably feeling a little disappointed, since its shares fell 8.3% to ₹708 in the week after its latest second-quarter results. Results look mixed - while revenue fell marginally short of analyst estimates at ₹712m, statutory earnings were in line with expectations, at ₹19.46 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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Taking into account the latest results, Tarsons Products' three analysts currently expect revenues in 2023 to be ₹2.99b, approximately in line with the last 12 months. Statutory earnings per share are predicted to increase 3.3% to ₹18.00. In the lead-up to this report, the analysts had been modelling revenues of ₹3.35b and earnings per share (EPS) of ₹19.57 in 2023. It looks like sentiment has fallen somewhat in the aftermath of these results, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

The analysts made no major changes to their price target of ₹842, suggesting the downgrades are not expected to have a long-term impact on Tarsons Products' 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. The most optimistic Tarsons Products analyst has a price target of ₹1,000 per share, while the most pessimistic values it at ₹756. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Tarsons Products 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. We would highlight that Tarsons Products' revenue growth is expected to slow, with the forecast 0.3% annualised growth rate until the end of 2023 being well below the historical 9.6% growth over the last year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 20% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Tarsons Products.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at ₹842, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Tarsons Products analysts - going out to 2025, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Tarsons Products , and understanding this should be part of your investment process.

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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.