These Analysts Think Pharming Group N.V.'s (AMS:PHARM) Sales Are Under Threat

The latest analyst coverage could presage a bad day for Pharming Group N.V. (AMS:PHARM), 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.

After this downgrade, Pharming Group's three analysts are now forecasting revenues of €189m in 2022. This would be a meaningful 13% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 30% to €0.027. Prior to this update, the analysts had been forecasting revenues of €219m and earnings per share (EPS) of €0.04 in 2022. Indeed, we can see that the analysts are a lot more bearish about Pharming Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Pharming Group

Analysts made no major changes to their price target of €1.73, suggesting the downgrades are not expected to have a long-term impact on Pharming Group's valuation. 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. There are some variant perceptions on Pharming Group, with the most bullish analyst valuing it at €1.80 and the most bearish at €1.79 per share. This is a very narrow spread of estimates, implying either that Pharming Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Pharming Group's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 13% growth on an annualised basis. This is compared to a historical growth rate of 24% 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 21% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Pharming Group.

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. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Pharming Group going forwards.

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 Pharming Group 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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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.