One of the biggest stories of last week was how Surface Oncology, Inc. (NASDAQ:SURF) shares plunged 24% in the week since its latest full-year results, closing yesterday at US$2.37. It was a moderately negative result overall - revenue fell 7.7% short of analyst estimates at US$15m, although at least statutory losses were marginally smaller than expected, at US$1.97 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Surface Oncology's three analysts is for revenues of US$24.3m in 2020, which would reflect a sizeable 58% increase on its sales over the past 12 months. Statutory losses are forecast to balloon 31% to US$1.35 per share. Before this earnings announcement, analysts had been forecasting revenues of US$12.7m and losses of US$1.87 per share in 2020. So we can see there's been a pretty clear increase in analyst sentiment following the latest results, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Despite these upgrades, analysts have not made any major changes to their price target of US$9.50, implying that their latest estimates don't have a long term impact on what they think the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Surface Oncology analyst has a price target of US$10.00 per share, while the most pessimistic values it at US$9.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's clear from the latest estimates that Surface Oncology's rate of growth is expected to accelerate meaningfully, with forecast 58% revenue growth noticeably faster than its historical growth of 13%p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Surface Oncology is expected to grow much faster than its market.
The Bottom Line
The most important thing to note from these estimates is that the consensus increased its forecast losses next year, suggesting all may not be well at Surface Oncology. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Surface Oncology going out to 2024, and you can see them free on our platform here..
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