The Tata Power Company Limited Just Missed EPS By 54%: Here's What Analysts Think Will Happen Next

The Tata Power Company Limited (NSE:TATAPOWER) shareholders are probably feeling a little disappointed, since its shares fell 8.7% to ₹232 in the week after its latest quarterly results. Sales of ₹110b surpassed estimates by 10.0%, although statutory earnings per share missed badly, coming in 54% below expectations at ₹1.33 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Tata Power after the latest results.

Check out our latest analysis for Tata Power

Taking into account the latest results, the most recent consensus for Tata Power from 16 analysts is for revenues of ₹460.9b in 2023 which, if met, would be a solid 12% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 53% to ₹7.41. Yet prior to the latest earnings, the analysts had been anticipated revenues of ₹448.9b and earnings per share (EPS) of ₹7.31 in 2023. There doesn't appear to have been a major change in sentiment following the results, other than the small lift in revenue estimates.

The analysts increased their price target 5.1% to ₹203, perhaps signalling that higher revenues are a strong leading indicator for Tata Power's 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 Tata Power analyst has a price target of ₹288 per share, while the most pessimistic values it at ₹100.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Tata Power's growth to accelerate, with the forecast 9.9% annualised growth to the end of 2023 ranking favourably alongside historical growth of 3.8% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.3% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Tata Power to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Tata Power. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Tata Power going out to 2024, and you can see them free on our platform here..

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

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.