Shareholders in Agios Pharmaceuticals, Inc. (NASDAQ:AGIO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
After this upgrade, Agios Pharmaceuticals' eleven analysts are now forecasting revenues of US$200m in 2020. This would be a decent 15% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 15% from last year to US$4.88. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$158m and losses of US$6.64 per share in 2020. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.
There was no major change to the consensus price target of US$62.77, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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. There are some variant perceptions on Agios Pharmaceuticals, with the most bullish analyst valuing it at US$80.00 and the most bearish at US$41.00 per share. 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.
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. We can infer from the latest estimates that forecasts expect a continuation of Agios Pharmaceuticals'historical trends, as next year's 15% revenue growth is roughly in line with 15% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 17% per year. So although Agios Pharmaceuticals is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Agios Pharmaceuticals is moving incrementally towards profitability. They also upgraded their revenue forecasts, although the latest estimates suggest that Agios Pharmaceuticals will grow in line with the overall market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Agios Pharmaceuticals.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Agios Pharmaceuticals analysts - going out to 2024, 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.
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