Some Analysts Just Cut Their Gujarat Gas Limited (NSE:GUJGASLTD) Estimates

The latest analyst coverage could presage a bad day for Gujarat Gas Limited (NSE:GUJGASLTD), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the eleven analysts covering Gujarat Gas provided consensus estimates of ₹180b revenue in 2023, which would reflect a perceptible 3.7% decline on its sales over the past 12 months. Statutory earnings per share are presumed to increase 8.5% to ₹18.83. Prior to this update, the analysts had been forecasting revenues of ₹203b and earnings per share (EPS) of ₹20.27 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a small dip in EPS estimates to boot.

Check out our latest analysis for Gujarat Gas

It'll come as no surprise then, to learn that the analysts have cut their price target 9.2% to ₹539. 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 Gujarat Gas analyst has a price target of ₹746 per share, while the most pessimistic values it at ₹380. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 3.7% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 26% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.3% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Gujarat Gas is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Gujarat Gas' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Gujarat Gas after today.

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 Gujarat Gas 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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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.