Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) Analysts Are Cutting Their Estimates: Here's What You Need To Know

The annual results for Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) were released last week, making it a good time to revisit its performance. Sales hit US$12m in line with forecasts, although the company reported a statutory loss per share of US$1.30 that was somewhat smaller than the analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Verrica Pharmaceuticals

Taking into account the latest results, the most recent consensus for Verrica Pharmaceuticals from six analysts is for revenues of US$13.9m in 2022 which, if met, would be a solid 16% increase on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$2.01 per share. Before this earnings announcement, the analysts had been modelling revenues of US$20.8m and losses of US$2.09 per share in 2022. We can see there's definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to next year's revenue estimates, while at the same time reducing their loss estimates.

There was no major change to the US$19.17average price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Verrica Pharmaceuticals, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$16.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Verrica Pharmaceuticals' revenue growth is expected to slow, with the forecast 16% annualised growth rate until the end of 2022 being well below the historical 95% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.3% annually. So it's pretty clear that, while Verrica Pharmaceuticals' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

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. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Verrica Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Verrica Pharmaceuticals analysts - going out to 2024, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Verrica Pharmaceuticals that we have uncovered.

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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.