What Does The Future Hold For Eton Pharmaceuticals, Inc. (NASDAQ:ETON)? These Analysts Have Been Cutting Their Estimates

The latest analyst coverage could presage a bad day for Eton Pharmaceuticals, Inc. (NASDAQ:ETON), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After this downgrade, Eton Pharmaceuticals' twin analysts are now forecasting revenues of US$24m in 2021. This would be a substantial 103% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting US$0.02 in per-share earnings. Before this latest update, the analysts had been forecasting revenues of US$38m and earnings per share (EPS) of US$0.23 in 2021. Indeed, we can see that the analysts are a lot more bearish about Eton Pharmaceuticals' prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Eton Pharmaceuticals

Despite the cuts to forecast earnings, there was no real change to the US$12.00 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. The most optimistic Eton Pharmaceuticals analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$10.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Eton Pharmaceuticals' revenue growth is expected to slow, with the forecast 3x annualised growth rate until the end of 2021 being well below the historical 2,021% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.3% annually. So it's pretty clear that, while Eton Pharmaceuticals' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Eton Pharmaceuticals. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Eton Pharmaceuticals after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2023, which can be seen for 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.
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