Want to participate in a short research study? Help shape the future of investing tools and earn a $40 gift card!
Last week, you might have seen that Theratechnologies Inc. (TSE:TH) released its quarterly result to the market. The early response was not positive, with shares down 2.6% to CA$3.03 in the past week. It was a pretty bad result overall; while revenues were in line with expectations at US$17m, statutory losses exploded to US$0.079 per share. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the five analysts covering Theratechnologies are now predicting revenues of US$100.4m in 2020. If met, this would reflect a substantial 54% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 24% to US$0.18. Before this latest report, the consensus had been expecting revenues of US$74.8m and US$0.13 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts lifting this year's revenue estimates, while at the same time increasing their loss per share numbers to reflect the cost of achieving this growth.
It will come as no surprise that expanding losses caused the consensus price target to fall 6.2% to CA$6.50with the analysts implicitly ranking ongoing losses as a greater concern than growing revenues. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Theratechnologies, with the most bullish analyst valuing it at CA$11.00 and the most bearish at CA$4.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. The analysts are definitely expecting Theratechnologies' growth to accelerate, with the forecast 54% growth ranking favourably alongside historical growth of 27% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 72% next year. It seems obvious that, while the future growth outlook is brighter than the recent past, Theratechnologies is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Theratechnologies. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Theratechnologies' future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Theratechnologies 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 1 warning sign for Theratechnologies that you need to be mindful of.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.