The analysts covering OPKO Health, Inc. (NASDAQ:OPK) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
After the downgrade, the consensus from OPKO Health's five analysts is for revenues of US$1.6b in 2021, which would reflect a chunky 17% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to dive 89% to US$0.012 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.8b and earnings per share (EPS) of US$0.084 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.
The consensus price target fell 18% to US$6.60, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 OPKO Health at US$8.50 per share, while the most bearish prices it at US$5.00. This shows there is still some 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with a forecast 31% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 6.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 10% annually for the foreseeable future. It's pretty clear that OPKO Health's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of OPKO Health.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple OPKO Health analysts - going out to 2023, and you can see them 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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