Need To Know: The Consensus Just Cut Its Knight Therapeutics Inc. (TSE:GUD) Estimates For 2021

The latest analyst coverage could presage a bad day for Knight Therapeutics Inc. (TSE:GUD), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the current consensus from Knight Therapeutics' eight analysts is for revenues of CA$206m in 2021 which - if met - would reflect a meaningful 13% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to plunge 82% to CA$0.037 in the same period. Before this latest update, the analysts had been forecasting revenues of CA$236m and earnings per share (EPS) of CA$0.096 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Knight Therapeutics

It'll come as no surprise then, to learn that the analysts have cut their price target 18% to CA$7.19. 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 Knight Therapeutics at CA$8.00 per share, while the most bearish prices it at CA$5.50. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. It's pretty clear that there is an expectation that Knight Therapeutics' revenue growth will slow down substantially, with revenues next year expected to grow 13%, compared to a historical growth rate of 78% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 31% next year. Factoring in the forecast slowdown in growth, it seems obvious that Knight Therapeutics is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Knight Therapeutics' future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Knight Therapeutics after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Knight Therapeutics analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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