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Glenmark Pharmaceuticals Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Simply Wall St

A week ago, Glenmark Pharmaceuticals Limited (NSE:GLENMARK) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 7.0% to hit ₹28b. Glenmark Pharmaceuticals also reported a profit of ₹9.06, which was an impressive 47% above what analysts had forecast. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.

Check out our latest analysis for Glenmark Pharmaceuticals

NSEI:GLENMARK Past and Future Earnings, November 18th 2019

Taking into account the latest results, the latest consensus from Glenmark Pharmaceuticals's 22 analysts is for revenues of ₹105.9b in 2020, which would reflect a credible 3.3% improvement in sales compared to the last 12 months. Earnings per share are expected to swell 13% to ₹25.63. Before this earnings report, analysts had been forecasting revenues of ₹106.5b and earnings per share (EPS) of ₹26.15 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

Analysts reconfirmed their price target of ₹432, showing that the business is executing well and in line with expectations. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Glenmark Pharmaceuticals, with the most bullish analyst valuing it at ₹653 and the most bearish at ₹315 per share. 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.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that Glenmark Pharmaceuticals's revenue growth is expected to slow, with forecast 3.3% increase next year well below the historical 9.4%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 10.0% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Glenmark Pharmaceuticals.

The Bottom Line

The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Glenmark Pharmaceuticals's revenues are expected to perform worse than the wider market. The consensus price target held steady at ₹432, with the latest estimates not enough to have an impact on analysts' estimated valuations.

With that in mind, we wouldn't be too quick to come to a conclusion on Glenmark Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have forecasts for Glenmark Pharmaceuticals going out to 2022, and you can see them free on our platform here.

It might also be worth considering whether Glenmark Pharmaceuticals's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.