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Investors in Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) had a good week, as its shares rose 9.5% to close at US$203 following the release of its yearly results. Revenues of US$186m beat expectations by a respectable 7.7%, although statutory losses per share increased. Ligand Pharmaceuticals lost US$0.18, which was 44% more than what the analysts had included in their models. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Ligand Pharmaceuticals' six analysts is for revenues of US$292.0m in 2021, which would reflect a sizeable 57% increase on its sales over the past 12 months. Earnings are expected to improve, with Ligand Pharmaceuticals forecast to report a statutory profit of US$3.26 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$288.8m and earnings per share (EPS) of US$4.03 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
Despite cutting their earnings forecasts,the analysts have lifted their price target 21% to US$225, suggesting that these impacts are not expected to weigh on the stock's value in the long term. 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. There are some variant perceptions on Ligand Pharmaceuticals, with the most bullish analyst valuing it at US$310 and the most bearish at US$198 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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 Ligand Pharmaceuticals' rate of growth is expected to accelerate meaningfully, with the forecast 57% revenue growth noticeably faster than its historical growth of 11%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 20% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Ligand Pharmaceuticals to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Ligand Pharmaceuticals. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Ligand Pharmaceuticals going out to 2025, and you can see them free on our platform here..
Even so, be aware that Ligand Pharmaceuticals is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...
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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