There's been a notable change in appetite for Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) shares in the week since its quarterly report, with the stock down 11% to US$130. Revenues missed the mark, coming in 12% below forecasts, at US$55m. Statutory profits were a real bright spot in contrast, with per-share profits of US$1.05 being a notable 176% above what the analysts were modelling. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the consensus forecast from Ligand Pharmaceuticals' seven analysts is for revenues of US$286.7m in 2021, which would reflect a sizeable 38% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 53% to US$3.73. Before this earnings report, the analysts had been forecasting revenues of US$291.8m and earnings per share (EPS) of US$3.05 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the sizeable expansion in earnings per share expectations following these results.
There's been no major changes to the consensus price target of US$220, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Ligand Pharmaceuticals analyst has a price target of US$310 per share, while the most pessimistic values it at US$190. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Ligand Pharmaceuticals' growth to accelerate, with the forecast 53% annualised growth to the end of 2021 ranking favourably alongside historical growth of 10% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Ligand Pharmaceuticals is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Ligand Pharmaceuticals' earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Ligand Pharmaceuticals going out to 2025, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 6 warning signs for Ligand Pharmaceuticals (of which 2 shouldn't be ignored!) you should know about.
If you’re looking to trade Ligand Pharmaceuticals, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
What are the risks and opportunities for Ligand Pharmaceuticals?
Trading at 55.4% below our estimate of its fair value
Earnings are forecast to grow 101.49% per year
Significant insider selling over the past 3 months
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
Ligand Pharmaceuticals Incorporated, a biopharmaceutical company, focuses on developing or acquiring technologies that help pharmaceutical companies to discover and develop medicines worldwide.
Excellent balance sheet and fair value.