Stock Analysis

Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) Analysts Are Cutting Their Estimates: Here's What You Need To Know

Source: Shutterstock

One of the biggest stories of last week was how Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) shares plunged 24% in the week since its latest annual results, closing yesterday at US$11.62. It looks like a positive result overall, with revenues of US$46m beating forecasts by 3.6%. Statutory losses of US$1.40 per share were roughly in line with what the analysts had forecast. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Aurinia Pharmaceuticals

NasdaqGM:AUPH Earnings and Revenue Growth March 3rd 2022

Taking into account the latest results, the most recent consensus for Aurinia Pharmaceuticals from seven analysts is for revenues of US$137.6m in 2022 which, if met, would be a substantial 202% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 51% to US$0.63. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$182.1m and losses of US$0.55 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.

The average price target fell 17% to US$27.71, implicitly signalling that lower earnings per share are a leading indicator for Aurinia Pharmaceuticals' 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 Aurinia Pharmaceuticals, with the most bullish analyst valuing it at US$34.00 and the most bearish at US$23.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. The analysts are definitely expecting Aurinia Pharmaceuticals' growth to accelerate, with the forecast 202% annualised growth to the end of 2022 ranking favourably alongside historical growth of 86% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 12% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Aurinia Pharmaceuticals is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Aurinia Pharmaceuticals. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will 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 Aurinia Pharmaceuticals' future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Aurinia Pharmaceuticals going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Aurinia Pharmaceuticals that you need to be mindful of.

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

Find out whether Aurinia Pharmaceuticals 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