Some Epizyme, Inc. (NASDAQ:EPZM) Analysts Just Made A Major Cut To Next Year's Estimates

One thing we could say about the analysts on Epizyme, Inc. (NASDAQ:EPZM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Epizyme's four analysts is for revenues of US$44m in 2022, which would reflect a meaningful 16% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$1.38. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$51m and losses of US$1.16 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Epizyme

The consensus price target fell 16% to US$5.52, with the analysts clearly concerned about the company following the weaker revenue and earnings 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 Epizyme at US$8.00 per share, while the most bearish prices it at US$0.60. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We can infer from the latest estimates that forecasts expect a continuation of Epizyme'shistorical trends, as the 21% annualised revenue growth to the end of 2022 is roughly in line with the 22% annual revenue growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 12% annually. So it's pretty clear that Epizyme is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Epizyme.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Epizyme's financials, such as major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 3 other flags we've identified.

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. 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.