DURECT Corporation (NASDAQ:DRRX) Analysts Are More Bearish Than They Used To Be

The latest analyst coverage could presage a bad day for DURECT Corporation (NASDAQ:DRRX), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from DURECT's three analysts is for revenues of US$15m in 2022, which would reflect a notable 9.7% improvement in sales compared to the last 12 months. Losses are expected to increase substantially, hitting US$0.19 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$18m and losses of US$0.16 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for DURECT

The consensus price target fell 5.6% to US$5.67, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 DURECT analyst has a price target of US$6.00 per share, while the most pessimistic values it at US$5.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that DURECT is forecast to grow faster in the future than it has in the past, with revenues expected to display 9.7% annualised growth until the end of 2022. If achieved, this would be a much better result than the 1.6% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 4.2% annually. Not only are DURECT's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of DURECT.

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 DURECT 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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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.