Today is shaping up negative for Cumberland Pharmaceuticals Inc. (NASDAQ:CPIX) shareholders, with the covering analyst delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the solitary analyst covering Cumberland Pharmaceuticals, is for revenues of US$40m in 2021, which would reflect a considerable 19% reduction in Cumberland Pharmaceuticals' sales over the past 12 months. Losses are supposed to balloon 59% to US$0.26 per share. Yet before this consensus update, the analyst had been forecasting revenues of US$46m and losses of US$0.22 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 13% to US$8.50, implicitly signalling that lower earnings per share are a leading indicator for Cumberland Pharmaceuticals' valuation.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 19%, a significant reduction from annual growth of 8.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Cumberland Pharmaceuticals is expected to lag the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Cumberland Pharmaceuticals. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Cumberland Pharmaceuticals.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Cumberland Pharmaceuticals going out as far as 2021, 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. 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.
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