It's been a good week for Gritstone Oncology, Inc. (NASDAQ:GRTS) shareholders, because the company has just released its latest quarterly results, and the shares gained 2.4% to US$6.46. The results overall were pretty much dead in line with analyst forecasts; revenues were US$1.3m and statutory losses were US$0.71 per share. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Gritstone Oncology after the latest results.
Taking into account the latest results, the most recent consensus for Gritstone Oncology from five analysts is for revenues of US$4.95m in 2020 which, if met, would be a notable 16% increase on its sales over the past 12 months. The loss per share is expected to ameliorate slightly, reducing to US$2.61. Before this latest report, the consensus had been expecting revenues of US$5.04m and US$2.85 per share in losses. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for this year.
The average price target held steady at US$22.14, seeming to indicate that business is performing in line with expectations. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Gritstone Oncology at US$31.00 per share, while the most bearish prices it at US$16.00. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Gritstone Oncology's revenue growth is expected to slow, with forecast 16% increase next year well below the historical 68% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 21% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Gritstone Oncology.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. 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 Gritstone Oncology. Long-term earnings power is much more important than next year's profits. We have forecasts for Gritstone Oncology going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Gritstone Oncology has 5 warning signs (and 1 which is a bit unpleasant) we think you should know about.
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