Shareholders in Adamas Pharmaceuticals, Inc. (NASDAQ:ADMS) had a terrible week, as shares crashed 25% to US$4.37 in the week since its latest yearly results. The results overall were pretty much dead in line with analyst forecasts; revenues were US$55m and statutory losses were US$3.80 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the nine analysts covering Adamas Pharmaceuticals are now predicting revenues of US$81.2m in 2020. If met, this would reflect a huge 49% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$2.57 per share. Before this latest report, the consensus had been expecting revenues of US$85.4m and US$2.44 per share in losses. Although analysts have lowered their sales forecasts, they’ve also made a their earnings per share estimates, which implies there’s been something of an uptick in sentiment following the latest results.
Analysts lifted their price target 6.2% to US$12.69, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock’s value. 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. Currently, the most bullish analyst values Adamas Pharmaceuticals at US$45.00 per share, while the most bearish prices it at US$3.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Adamas Pharmaceuticals’s past performance and to peers in the same market. It’s clear from the latest estimates that Adamas Pharmaceuticals’s rate of growth is expected to accelerate meaningfully, with forecast 49% revenue growth noticeably faster than its historical growth of 12%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 16% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Adamas Pharmaceuticals is expected to grow much faster than its market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Adamas Pharmaceuticals is moving incrementally towards profitability. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Adamas Pharmaceuticals going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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