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Last week, you might have seen that Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) released its quarterly result to the market. The early response was not positive, with shares down 9.4% to US$4.39 in the past week. Revenues disappointed slightly, as sales of US$29m were 7.4% below what the analysts had predicted. Profits were a relative bright spot, with statutory per-share earnings of US$0.10 coming in 15% above what was anticipated. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Catalyst Pharmaceuticals' five analysts is for revenues of US$125.0m in 2020, which would reflect an okay 5.1% increase on its sales over the past 12 months. Statutory earnings per share are forecast to dip 9.6% to US$0.38 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$141.1m and earnings per share (EPS) of US$0.39 in 2020. Indeed, we can see that sentiment has declined measurably after results came out, with a real cut to revenue estimates and a small dip in EPS estimates to boot.
The consensus price target fell 11% to US$7.79, with the weaker earnings outlook clearly leading valuation estimates. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Catalyst Pharmaceuticals analyst has a price target of US$10.00 per share, while the most pessimistic values it at US$5.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Catalyst Pharmaceuticals' revenue growth is expected to slow, with forecast 5.1% increase next year well below the historical 797% growth over the last year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 24% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Catalyst Pharmaceuticals.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Catalyst Pharmaceuticals. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse 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 Catalyst Pharmaceuticals' future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Catalyst Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Catalyst Pharmaceuticals analysts - going out to 2024, and you can see them free on our platform here.
Even so, be aware that Catalyst Pharmaceuticals is showing 1 warning sign in our investment analysis , you should know about...
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