As you might know, Xenon Pharmaceuticals Inc. (NASDAQ:XENE) last week released its latest quarterly, and things did not turn out so great for shareholders. Statutory earnings fell substantially short of expectations, with revenues of US$6.6m missing forecasts by 44%. Losses exploded, with a per-share loss of US$0.25 some 130% below prior forecasts. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the eight analysts covering Xenon Pharmaceuticals provided consensus estimates of US$20.9m revenue in 2021, which would reflect a sizeable 31% decline on its sales over the past 12 months. Losses are forecast to balloon 43% to US$1.23 per share. Before this earnings announcement, the analysts had been modelling revenues of US$23.7m and losses of US$1.35 per share in 2021. 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$23.00average 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. Currently, the most bullish analyst values Xenon Pharmaceuticals at US$25.00 per share, while the most bearish prices it at US$22.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 31%, a significant reduction from annual growth of 22% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 21% annually for the foreseeable future. It's pretty clear that Xenon Pharmaceuticals' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, long term profitability is more important for the value creation process. 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Xenon Pharmaceuticals going out to 2024, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 3 warning signs for Xenon Pharmaceuticals (1 shouldn't be ignored!) that you need to be mindful of.
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