Bearish: Analysts Just Cut Their KemPharm, Inc. (NASDAQ:KMPH) Revenue and EPS estimates

One thing we could say about the analysts on KemPharm, Inc. (NASDAQ:KMPH) - 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 the analysts have soured majorly on the business.

Following the downgrade, the latest consensus from KemPharm's three analysts is for revenues of US$19m in 2023, which would reflect a major 73% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 27% to US$0.75. However, before this estimates update, the consensus had been expecting revenues of US$22m and US$0.65 per share in losses. 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.

Check out the opportunities and risks within the US Pharmaceuticals industry.

The consensus price target was broadly unchanged at US$19.00, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values KemPharm at US$28.00 per share, while the most bearish prices it at US$10.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. We can infer from the latest estimates that forecasts expect a continuation of KemPharm'shistorical trends, as the 55% annualised revenue growth to the end of 2023 is roughly in line with the 47% annual revenue growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 3.8% annually. So it's pretty clear that KemPharm is forecast to grow substantially faster than its 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 KemPharm. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected next year, we wouldn't be surprised if investors were a bit wary of KemPharm.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple KemPharm analysts - going out to 2024, and you can see them free on our platform here.

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