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Avid Bioservices, Inc. Beat Analyst Profit Forecasts, And Analysts Have New Estimates

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Simply Wall St
·4 min read
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Shareholders will be ecstatic, with their stake up 26% over the past week following Avid Bioservices, Inc.'s (NASDAQ:CDMO) latest second-quarter results. Revenues beat expectations by 36%, and sales of US$21m were sufficient to generate a statutory profit of US$0.01 - a pleasant surprise given that the analysts were forecasting a loss! 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Avid Bioservices

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Avid Bioservices' three analysts is for revenues of US$85.7m in 2021, which would reflect a decent 18% improvement in sales compared to the last 12 months. Avid Bioservices is also expected to turn profitable, with statutory earnings of US$0.025 per share. Before this earnings announcement, the analysts had been modelling revenues of US$80.6m and losses of US$0.047 per share in 2021. So we can see there's been a pretty clear upgrade to expectations following the latest results, with a small lift in revenues expected to lead to profitability earlier than previously forecast.

Despite these upgrades,the analysts have not made any major changes to their price target of US$11.67, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Avid Bioservices analyst has a price target of US$12.00 per share, while the most pessimistic values it at US$11.00. This is a very narrow spread of estimates, implying either that Avid Bioservices is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. The analysts are definitely expecting Avid Bioservices' growth to accelerate, with the forecast 18% growth ranking favourably alongside historical growth of 7.8% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 21% per year. Avid Bioservices is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing to take away is that there's been a clear step-change in belief around the business' prospects, with the analysts now expecting Avid Bioservices to become profitable next year. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. The consensus price target held steady at US$11.67, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Avid Bioservices. Long-term earnings power is much more important than next year's profits. We have forecasts for Avid Bioservices going out to 2025, and you can see them free on our platform here.

Even so, be aware that Avid Bioservices is showing 1 warning sign in our investment analysis , you should know about...

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 editorial-team@simplywallst.com.