The latest analyst coverage could presage a bad day for FibroGen, Inc. (NASDAQ:FGEN), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the most recent consensus for FibroGen from its ten analysts is for revenues of US$419m in 2021 which, if met, would be a major 138% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 39% to US$1.28. Yet before this consensus update, the analysts had been forecasting revenues of US$480m and losses of US$0.74 per share in 2021. 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.
The consensus price target fell 12% to US$54.56, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic FibroGen analyst has a price target of US$72.00 per share, while the most pessimistic values it at US$44.00. 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. It's clear from the latest estimates that FibroGen's rate of growth is expected to accelerate meaningfully, with the forecast 138% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 5.8% p.a. 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 18% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that FibroGen is expected to grow much 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 FibroGen.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for FibroGen going out to 2025, 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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