Earnings Update: Valeo Pharma Inc. (TSE:VPH) Just Reported And Analysts Are Trimming Their Forecasts

It's been a pretty great week for Valeo Pharma Inc. (TSE:VPH) shareholders, with its shares surging 12% to CA$0.56 in the week since its latest quarterly results. Statutory results overall were mixed, with revenues coming in 27% lower than the analysts predicted. What's really surprising is that losses of CA$0.06 per share were pretty much in line with forecasts, despite the revenue miss. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Valeo Pharma after the latest results.

See our latest analysis for Valeo Pharma

Following the latest results, Valeo Pharma's three analysts are now forecasting revenues of CA$28.1m in 2022. This would be a substantial 55% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 13% from last year to CA$0.23. Yet prior to the latest earnings, the analysts had been forecasting revenues of CA$36.0m and losses of CA$0.17 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.

The consensus price target fell 22% to CA$1.33, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Valeo Pharma at CA$2.30 per share, while the most bearish prices it at CA$0.70. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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. The analysts are definitely expecting Valeo Pharma's growth to accelerate, with the forecast 141% annualised growth to the end of 2022 ranking favourably alongside historical growth of 37% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.1% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Valeo Pharma to grow faster than the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Valeo Pharma. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Valeo Pharma's future valuation.

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 Valeo Pharma going out to 2024, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Valeo Pharma (at least 2 which can't be ignored) , and understanding them should be part of your investment process.

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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.