It's been a good week for Dicerna Pharmaceuticals, Inc. (NASDAQ:DRNA) shareholders, because the company has just released its latest quarterly results, and the shares gained 4.6% to US$20.84. Revenues fell badly short of expectations, with sales of US$34m missing analyst predictions by 40%. Unsurprisingly, the statutory profit the analysts had been forecasting evaporated, turning into a loss of US$0.31 per share. 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 consensus forecast from Dicerna Pharmaceuticals' eight analysts is for revenues of US$250.6m in 2020, which would reflect a huge 357% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.15 per share. In the lead-up to this report, the analysts had been modelling revenues of US$266.8m and earnings per share (EPS) of US$1.40 in 2020. The analysts have made an abrupt about-face on Dicerna Pharmaceuticals, administering a minor downgrade to to revenue forecasts and slashing the earnings outlook from a profit to loss.
There was no major change to the consensus price target of US$33.38, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. There are some variant perceptions on Dicerna Pharmaceuticals, with the most bullish analyst valuing it at US$45.00 and the most bearish at US$25.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Dicerna Pharmaceuticals' rate of growth is expected to accelerate meaningfully, with the forecast 4x revenue growth noticeably faster than its historical growth of 85%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 Dicerna Pharmaceuticals to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Dicerna Pharmaceuticals to become unprofitable next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Dicerna Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have forecasts for Dicerna Pharmaceuticals going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 4 warning signs for Dicerna Pharmaceuticals (1 makes us a bit uncomfortable!) that we have uncovered.
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