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It's been a mediocre week for Epizyme, Inc. (NASDAQ:EPZM) shareholders, with the stock dropping 10% to US$11.45 in the week since its latest third-quarter results. Statutory losses were a bit smaller than expected, at just US$0.55 per share, even though revenues of US$3.6m missed analyst expectations by a shocking 40%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Epizyme after the latest results.
Taking into account the latest results, the consensus forecast from Epizyme's six analysts is for revenues of US$75.1m in 2021, which would reflect a substantial 543% improvement in sales compared to the last 12 months. Losses are expected to hold steady at around US$2.22. Before this latest report, the consensus had been expecting revenues of US$93.9m and US$2.13 per share in losses. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 14% to US$23.50, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Epizyme at US$36.00 per share, while the most bearish prices it at US$12.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Epizyme's rate of growth is expected to accelerate meaningfully, with the forecast 5x revenue growth noticeably faster than its historical growth of 26%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 Epizyme to grow faster than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Epizyme. They also downgraded their revenue estimates, although industry data suggests that Epizyme's revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Epizyme's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Epizyme going out to 2024, and you can see them free on our platform here..
Plus, you should also learn about the 3 warning signs we've spotted with Epizyme .
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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