Industry Analysts Just Upgraded Their Cipher Pharmaceuticals Inc. (TSE:CPH) Revenue Forecasts By 12%

Celebrations may be in order for Cipher Pharmaceuticals Inc. (TSE:CPH) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts have sharply increased their revenue numbers, with a view that Cipher Pharmaceuticals will make substantially more sales than they'd previously expected. The market seems to be pricing in some improvement in the business too, with the stock up 9.8% over the past week, closing at CA$0.90. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the latest upgrade, the three analysts covering Cipher Pharmaceuticals provided consensus estimates of US$18m revenue in 2021, which would reflect an uncomfortable 15% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plummet 31% to US$0.18 in the same period. Before this latest update, the analysts had been forecasting revenues of US$16m and earnings per share (EPS) of US$0.17 in 2021. The most recent forecasts are noticeably more optimistic, with a solid increase in revenue estimates and a lift to earnings per share as well.

Check out our latest analysis for Cipher Pharmaceuticals

As a result, it might be a surprise to see that the analysts have cut their price target 19% to CA$1.36, which could suggest the forecast improvement in performance is not expected to last. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Cipher Pharmaceuticals, with the most bullish analyst valuing it at CA$2.24 and the most bearish at CA$0.85 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Over the past five years, revenues have declined around 9.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 15% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 33% next year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Cipher Pharmaceuticals to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Seeing the dramatic upgrade to next year's forecasts, it might be time to take another look at Cipher Pharmaceuticals.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Cipher Pharmaceuticals going out to 2023, and you can see them free on our platform here..

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