Diplomat Pharmacy, Inc. (NYSE:DPLO) investors will be delighted, with the company turning in some strong numbers with its latest results. The results overall were pretty good, with revenues of US$1.3b exceeding expectations and losses coming in at justUS$2.35 per share, some 1109% below what analysts had forecast. Following the result, 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 forecasts to see whether analysts have changed their mind on Diplomat Pharmacy after the latest results.
Taking into account the latest results, the current consensus, from the eleven analysts covering Diplomat Pharmacy, is for revenues of US$4.59b in 2020, which would reflect a definite 12% reduction in Diplomat Pharmacy's sales over the past 12 months. Losses are forecast to balloon 93% to US$0.57 per share. Before this latest report, the consensus had been expecting revenues of US$4.92b and US$0.52 per share in losses. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share forecasts.
The average analyst price target fell 20% to US$4.95, implicitly signalling that lower earnings per share are a leading indicator for Diplomat Pharmacy's valuation. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Diplomat Pharmacy, with the most bullish analyst valuing it at US$7.50 and the most bearish at US$2.00 per share. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. With this in mind, we wouldn't assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Diplomat Pharmacy's past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 12% revenue decline a notable change from historical growth of 17% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 6.4% annually for the foreseeable future. It's pretty clear that Diplomat Pharmacy's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Diplomat Pharmacy is moving incrementally towards profitability. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Diplomat Pharmacy's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Diplomat Pharmacy analysts - going out to 2023, and you can see them free on our platform here.
You can also view our analysis of Diplomat Pharmacy's balance sheet, and whether we think Diplomat Pharmacy is carrying too much debt, for free on our platform here.
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