Analysts Just Made A Major Revision To Their RVL Pharmaceuticals plc (NASDAQ:RVLP) Revenue Forecasts

Market forces rained on the parade of RVL Pharmaceuticals plc (NASDAQ:RVLP) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Surprisingly the share price has been buoyant, rising 10% to US$0.90 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the current consensus from RVL Pharmaceuticals' five analysts is for revenues of US$49m in 2023 which - if met - would reflect a sizeable 32% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 34% to US$0.38. Yet before this consensus update, the analysts had been forecasting revenues of US$60m and losses of US$0.38 per share in 2023. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.

View our latest analysis for RVL Pharmaceuticals

Analysts lifted their price target 5.4% to US$3.60 per share, with reduced revenue estimates seemingly not expected to have a long-term impact on the intrinsic value of the business. 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. Currently, the most bullish analyst values RVL Pharmaceuticals at US$6.00 per share, while the most bearish prices it at US$2.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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. One thing stands out from these estimates, which is that RVL Pharmaceuticals is forecast to grow faster in the future than it has in the past, with revenues expected to display 45% annualised growth until the end of 2023. If achieved, this would be a much better result than the 47% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 7.0% per year. So it looks like RVL Pharmaceuticals is expected to grow faster than its competitors, at least for a while.

The Bottom Line

Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on RVL Pharmaceuticals after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with RVL Pharmaceuticals' business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other risks we've identified.

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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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.