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Ardelyx, Inc. (NASDAQ:ARDX) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's forecasts. The revenue forecast for next year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline. Investors have been pretty optimistic on Ardelyx too, with the stock up 33% to US$1.23 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
After the upgrade, the consensus from Ardelyx's seven analysts is for revenues of US$8.1m in 2022, which would reflect a concerning 26% decline in sales compared to the last year of performance. The loss per share is anticipated to greatly reduce in the near future, narrowing 25% to US$1.00. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$6.0m and losses of US$1.01 per share in 2022. So there's definitely been a change in sentiment in this update, with the analysts upgrading next year's revenue estimates, while at the same time holding losses per share steady.
The consensus price target held steady at US$4.00 despite the upgrade to revenue forecasts and ongoing losses. Analysts seem to think the business is otherwise performing roughly in line with expectations. 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. Currently, the most bullish analyst values Ardelyx at US$7.00 per share, while the most bearish prices it at US$1.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it's the idea that Ardelyx's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 21% to the end of 2022. This tops off a historical decline of 4.2% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 15% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Ardelyx to suffer worse than the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Ardelyx is moving incrementally towards profitability. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Seeing the dramatic upgrade to next year's forecasts, it might be time to take another look at Ardelyx.
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 Ardelyx 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.
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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.