Market forces rained on the parade of UroGen Pharma Ltd. (NASDAQ:URGN) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the current consensus from UroGen Pharma's eight analysts is for revenues of US$47m in 2021 which - if met - would reflect a major 143% increase on its sales over the past 12 months. Losses are forecast to narrow 8.3% to US$4.85 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$52m and losses of US$4.70 per share in 2021. 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.
There was no major change to the consensus price target of US$36.57, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values UroGen Pharma at US$51.00 per share, while the most bearish prices it at US$21.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for 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. The analysts are definitely expecting UroGen Pharma's growth to accelerate, with the forecast 226% annualised growth to the end of 2021 ranking favourably alongside historical growth of 42% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that UroGen Pharma 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 UroGen Pharma. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. 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 UroGen Pharma after today.
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 UroGen Pharma analysts - going out to 2025, and you can see them free on our platform here.
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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