Analysts Just Published A Bright New Outlook For Castle Biosciences, Inc.'s (NASDAQ:CSTL)

Published
August 14, 2022
NasdaqGM:CSTL
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Castle Biosciences, Inc. (NASDAQ:CSTL) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. The market may be pricing in some blue sky too, with the share price gaining 11% to US$33.94 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following the upgrade, the latest consensus from Castle Biosciences' seven analysts is for revenues of US$132m in 2022, which would reflect a sizeable 20% improvement in sales compared to the last 12 months. Losses are supposed to balloon 72% to US$2.91 per share. However, before this estimates update, the consensus had been expecting revenues of US$120m and US$3.33 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

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NasdaqGM:CSTL Earnings and Revenue Growth August 14th 2022

There was no major change to the consensus price target of US$50.57, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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. Currently, the most bullish analyst values Castle Biosciences at US$65.00 per share, while the most bearish prices it at US$40.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Castle Biosciences shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Castle Biosciences' past performance and to peers in the same industry. It's clear from the latest estimates that Castle Biosciences' rate of growth is expected to accelerate meaningfully, with the forecast 44% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 31% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.1% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Castle Biosciences to grow faster than the wider industry.

The Bottom Line

The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Castle Biosciences' prospects. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Castle Biosciences.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Castle Biosciences going out to 2024, and you can see them free on our platform here..

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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