Investors in Sage Therapeutics, Inc. (NASDAQ:SAGE) had a good week, as its shares rose 6.4% to close at US$78.06 following the release of its third-quarter results. It wasn't the greatest result, with ongoing losses and revenues of US$1.6m falling short of analyst predictions. The losses were a relative bright spot though, with a statutory per-share loss of US$2.03 being 14% smaller than the analysts forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Sage Therapeutics after the latest results.
Taking into account the latest results, the most recent consensus for Sage Therapeutics from 20 analysts is for revenues of US$18.4m in 2021 which, if met, would be a substantial 164% increase on its sales over the past 12 months. Losses are expected to be contained, narrowing 13% from last year to US$9.04. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$19.4m and losses of US$9.25 per share in 2021. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers fell somewhat.
The consensus price target rose 13% to US$92.65, with the analysts increasingly optimistic about shrinking losses, despite the expected decline in sales. 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 Sage Therapeutics analyst has a price target of US$190 per share, while the most pessimistic values it at US$35.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Sage Therapeutics' rate of growth is expected to accelerate meaningfully, with the forecast 164% revenue growth noticeably faster than its historical growth of 34% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 21% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Sage Therapeutics to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Still, earnings per share are more important to value creation for shareholders. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Sage Therapeutics. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Sage Therapeutics going out to 2024, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Sage Therapeutics that you should be aware of.
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