Sonata Software Limited Just Missed Earnings - But Analysts Have Updated Their Models

It's been a good week for Sonata Software Limited (NSE:SONATSOFTW) shareholders, because the company has just released its latest second-quarter results, and the shares gained 8.9% to ₹244. Sonata Software reported revenues of ₹24b, which blew past expectations. Statutory earnings per share (EPS) of ₹4.21 came in 7.5% short of forecasts. 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 Sonata Software after the latest results.

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Taking into account the latest results, the most recent consensus for Sonata Software from seven analysts is for revenues of ₹116.4b in 2027. If met, it would imply a modest 3.0% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to increase 5.3% to ₹17.48. Yet prior to the latest earnings, the analysts had been anticipated revenues of ₹116.4b and earnings per share (EPS) of ₹17.55 in 2027. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

Check out our latest analysis for Sonata Software

The analysts reconfirmed their price target of ₹311, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Sonata Software at ₹340 per share, while the most bearish prices it at ₹260. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Sonata Software is an easy business to forecast or the the analysts are all using similar 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 2027 expected to display 6.1% growth on an annualised basis. This is compared to a historical growth rate of 16% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.2% annually. Factoring in the forecast slowdown in growth, it looks like Sonata Software is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at ₹311, with the latest estimates not enough to have an impact on their price targets.

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 forecasts for Sonata Software going out to 2029, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Sonata Software you should know about.

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