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The analysts covering Ardelyx, Inc. (NASDAQ:ARDX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After this downgrade, Ardelyx's six analysts are now forecasting revenues of US$19m in 2021. This would be a major 49% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.43 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$22m and losses of US$1.33 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target was broadly unchanged at US$13.50, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. The most optimistic Ardelyx analyst has a price target of US$15.00 per share, while the most pessimistic values it at US$11.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that Ardelyx's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 70% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 16% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 14% per year. So it looks like Ardelyx is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Ardelyx. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Ardelyx after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Ardelyx analysts - going out to 2025, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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.
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