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It's been a good week for Synlogic, Inc. (NASDAQ:SYBX) shareholders, because the company has just released its latest third-quarter results, and the shares gained 9.7% to US$2.03. Statutory results overall were mixed, with revenues coming in 100% lower than the analysts predicted. What's really surprising is that losses of US$0.36 per share were 22% smaller than what was predicted. 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.
Following the recent earnings report, the consensus from six analysts covering Synlogic is for revenues of US$1.52m in 2021, implying a not inconsiderable 14% decline in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$1.49. Before this latest report, the consensus had been expecting revenues of US$1.20m and US$1.67 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 next year's revenue estimates, while at the same time reducing their loss estimates.
Yet despite these upgrades, the analysts cut their price target 8.2% to US$8.00, implicitly signalling that the ongoing losses are likely to weigh negatively on Synlogic's valuation. 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. The most optimistic Synlogic analyst has a price target of US$13.00 per share, while the most pessimistic values it at US$5.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Synlogic's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Synlogic'sdecline is expected to accelerate, with revenues forecast to fall 14% next year, topping off a historical decline of 7.4% a year over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 21% per year. So while a broad number of companies are forecast to decline, unfortunately Synlogic is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Synlogic going out to 2024, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 6 warning signs for Synlogic (1 makes us a bit uncomfortable) you should be aware of.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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