Shareholders in Arcus Biosciences, Inc. (NYSE:RCUS) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The market may be pricing in some blue sky too, with the share price gaining 31% to US$48.46 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the current consensus from Arcus Biosciences' nine analysts is for revenues of US$194m in 2022 which - if met - would reflect a sizeable 413% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 26% to US$2.92. Yet before this consensus update, the analysts had been forecasting revenues of US$106m and losses of US$4.23 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
The consensus price target rose 17% to US$64.60, with the analysts encouraged by the higher revenue and lower forecast losses for next year. 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. The most optimistic Arcus Biosciences analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$45.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Arcus Biosciences' rate of growth is expected to accelerate meaningfully, with the forecast 270% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 69% 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 16% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Arcus Biosciences is expected to grow much faster than its industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for next year, reflecting increased optimism around Arcus Biosciences' prospects. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Arcus Biosciences.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Arcus Biosciences going out to 2023, 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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.
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