US$5.13: That's What Analysts Think Nephros, Inc. (NASDAQ:NEPH) Is Worth After Its Latest Results

Nephros, Inc. (NASDAQ:NEPH) shareholders are probably feeling a little disappointed, since its shares fell 9.4% to US$1.69 in the week after its latest second-quarter results. It was a respectable set of results; while revenues of US$2.9m were in line with analyst predictions, statutory losses were 16% smaller than expected, with Nephros losing US$0.12 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Nephros

After the latest results, the three analysts covering Nephros are now predicting revenues of US$11.0m in 2022. If met, this would reflect a reasonable 4.6% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$0.50. Before this earnings announcement, the analysts had been modelling revenues of US$11.1m and losses of US$0.60 per share in 2022. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a notable improvement in losses per share in particular.

The consensus price target fell 33% to US$5.13despite the forecast for smaller losses next year. It looks like the ongoing lack of profitability is starting to weigh on valuations. 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. The most optimistic Nephros analyst has a price target of US$5.25 per share, while the most pessimistic values it at US$5.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Nephros is an easy business to forecast or the the analysts are all using similar assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Nephros' revenue growth is expected to slow, with the forecast 9.4% annualised growth rate until the end of 2022 being well below the historical 21% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.5% per year. So it's pretty clear that, while Nephros' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, there were no major changes to revenue forecasts, with the business still 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 Nephros' future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Nephros. Long-term earnings power is much more important than next year's profits. We have forecasts for Nephros going out to 2024, and you can see them free on our platform here.

You still need to take note of risks, for example - Nephros has 2 warning signs we think you should be aware of.

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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.