Market forces rained on the parade of Eagle Pharmaceuticals, Inc. (NASDAQ:EGRX) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After this downgrade, Eagle Pharmaceuticals' four analysts are now forecasting revenues of US$198m in 2020. This would be a reasonable 2.8% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 22% to US$0.14 in the same period. Previously, the analysts had been modelling revenues of US$220m and earnings per share (EPS) of US$0.78 in 2020. Indeed, we can see that the analysts are a lot more bearish about Eagle Pharmaceuticals' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Analysts made no major changes to their price target of US$51.67, suggesting the downgrades are not expected to have a long-term impact on Eagle Pharmaceuticals'valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Eagle Pharmaceuticals analyst has a price target of US$59.00 per share, while the most pessimistic values it at US$46.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Eagle Pharmaceuticals is an easy business to forecast or the underlying assumptions are obvious.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Eagle Pharmaceuticals' past performance and to peers in the same industry. We would highlight that Eagle Pharmaceuticals' revenue growth is expected to slow, with forecast 2.8% increase next year well below the historical 21% p.a. growth over the last five years. 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 Eagle Pharmaceuticals.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Eagle Pharmaceuticals. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Eagle Pharmaceuticals.
Worse, Eagle Pharmaceuticals is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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