Stock Analysis

Alliance Pharma plc Just Missed Earnings - But Analysts Have Updated Their Models

Source: Shutterstock

It's shaping up to be a tough period for Alliance Pharma plc (LON:APH), which a week ago released some disappointing annual results that could have a notable impact on how the market views the stock. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at UK£167m, statutory earnings missed forecasts by an incredible 95%, coming in at just UK£0.0017 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Alliance Pharma

AIM:APH Earnings and Revenue Growth March 24th 2023

After the latest results, the six analysts covering Alliance Pharma are now predicting revenues of UK£188.6m in 2023. If met, this would reflect a solid 13% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 2,381% to UK£0.043. In the lead-up to this report, the analysts had been modelling revenues of UK£189.6m and earnings per share (EPS) of UK£0.044 in 2023. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target fell 6.2% to UK£0.91, with the analysts clearly linking lower forecast earnings to the performance of the stock price. 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. The most optimistic Alliance Pharma analyst has a price target of UK£1.05 per share, while the most pessimistic values it at UK£0.65. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. It's clear from the latest estimates that Alliance Pharma's rate of growth is expected to accelerate meaningfully, with the forecast 13% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 9.6% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.5% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Alliance Pharma is expected to grow much faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Alliance Pharma. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to 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 Alliance Pharma's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Alliance Pharma. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Alliance Pharma analysts - going out to 2025, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Alliance Pharma you should be aware of.

Valuation is complex, but we're helping make it simple.

Find out whether Alliance Pharma is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis