Earnings Miss: Sonata Software Limited Missed EPS By 27% And Analysts Are Revising Their Forecasts

One of the biggest stories of last week was how Sonata Software Limited (NSE:SONATSOFTW) shares plunged 24% in the week since its latest annual results, closing yesterday at ₹519. Statutory earnings per share fell badly short of expectations, coming in at ₹11.10, some 27% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at ₹87b. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Sonata Software

After the latest results, the five analysts covering Sonata Software are now predicting revenues of ₹98.0b in 2025. If met, this would reflect a meaningful 12% improvement in revenue compared to the last 12 months. Per-share earnings are expected to soar 85% to ₹20.55. Yet prior to the latest earnings, the analysts had been anticipated revenues of ₹103.4b and earnings per share (EPS) of ₹23.06 in 2025. 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.

The consensus price target fell 7.0% to ₹812, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Sonata Software analyst has a price target of ₹900 per share, while the most pessimistic values it at ₹740. This is a very narrow spread of estimates, implying either that Sonata Software is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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 Sonata Software's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 22% 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 7.4% annually. So it's pretty clear that, while Sonata Software's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

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. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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. We have estimates - from multiple Sonata Software analysts - going out to 2027, and you can see them free on our platform here.

It is also worth noting that we have found 4 warning signs for Sonata Software that you need to take into consideration.

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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.