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There's been a notable change in appetite for Champions Oncology, Inc. (NASDAQ:CSBR) shares in the week since its yearly report, with the stock down 11% to US$9.05. Revenues came in at US$32m, in line with estimates, while Champions Oncology reported a statutory loss of US$0.17 per share, well short of prior analyst forecasts for a profit. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Champions Oncology after the latest results.
Following the latest results, Champions Oncology's three analysts are now forecasting revenues of US$37.5m in 2021. This would be a solid 17% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Champions Oncology forecast to report a statutory profit of US$0.10 per share. In the lead-up to this report, the analysts had been modelling revenues of US$36.9m and earnings per share (EPS) of US$0.15 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.
Despite cutting their earnings forecasts,the analysts have lifted their price target 6.5% to US$11.00, suggesting that these impacts are not expected to weigh on the stock's value in the long term. 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. The most optimistic Champions Oncology analyst has a price target of US$12.00 per share, while the most pessimistic values it at US$10.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Champions Oncology's revenue growth will slow down substantially, with revenues next year expected to grow 17%, compared to a historical growth rate of 25% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.2% next year. So it's pretty clear that, while Champions Oncology's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Champions Oncology analysts - going out to 2025, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Champions Oncology you should be aware of.
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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