Things Look Grim For Sage Therapeutics, Inc. (NASDAQ:SAGE) After Today's Downgrade

Today is shaping up negative for Sage Therapeutics, Inc. (NASDAQ:SAGE) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the 21 analysts covering Sage Therapeutics are now predicting revenues of US$71m in 2023. If met, this would reflect a major improvement in sales compared to the last 12 months. Losses are forecast to narrow 6.0% to US$9.31 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$165m and losses of US$7.97 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Sage Therapeutics

The consensus price target fell 55% to US$27.33, implicitly signalling that lower earnings per share are a leading indicator for Sage Therapeutics' valuation.

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 exponential annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 8.7% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Sage Therapeutics is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Sage Therapeutics. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

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 Sage Therapeutics analysts - going out to 2025, 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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