The investors in CytomX Therapeutics, Inc.'s (NASDAQ:CTMX) will be rubbing their hands together with glee today, after the share price leapt 27% to US$14.24 in the week following its first-quarter results. Revenues beat expectations by 136%, and sales of US$50m were sufficient to generate a statutory profit of US$0.26 - a pleasant surprise given that the analysts were forecasting a loss! 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from CytomX Therapeutics' nine analysts is for revenues of US$131.1m in 2020, which would reflect a sizeable 69% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 54% to US$0.77. Before this latest report, the consensus had been expecting revenues of US$80.7m and US$1.64 per share in losses. 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.
It will come as no surprise to learn thatthe analysts have increased their price target for CytomX Therapeutics 12% to US$14.90 on the back of these upgrades. 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. There are some variant perceptions on CytomX Therapeutics, with the most bullish analyst valuing it at US$18.00 and the most bearish at US$7.00 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.
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. It's clear from the latest estimates that CytomX Therapeutics' rate of growth is expected to accelerate meaningfully, with the forecast 69% revenue growth noticeably faster than its historical growth of 40%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 21% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect CytomX Therapeutics to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is 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.
With that in mind, we wouldn't be too quick to come to a conclusion on CytomX Therapeutics. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for CytomX Therapeutics going out to 2024, and you can see them free on our platform here..
It is also worth noting that we have found 3 warning signs for CytomX Therapeutics (1 can't be ignored!) that you need to take into consideration.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.