Osmotica Pharmaceuticals plc (NASDAQ:OSMT) just released its quarterly report and things are looking bullish. Sales crushed expectations at US$65m, beating expectations by 20%. Osmotica Pharmaceuticals reported a loss of US$2.15 per share, which - although not amazing - was much smaller than analysts predicted. 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. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
Following the recent earnings report, the consensus fromthree analysts covering Osmotica Pharmaceuticals expects revenues of US$195.8m in 2020, implying a substantial 20% decline in sales compared to the last 12 months. Losses are forecast to balloon 82% to US$1.18 per share. Prior to the latest earnings, analysts were forecasting revenues of US$193.4m in 2020, and did not provide an EPS estimate. So we can see that while the consensus made no real change to its revenue estimates, analysts began providing loss per share estimates, suggesting the business' (lack of) earnings is becoming more crucial to the business case following these results.
The consensus price target fell 35% to US$8.50 per share, with analysts clearly concerned by ballooning losses. 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. There are some variant perceptions on Osmotica Pharmaceuticals, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$8.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Further, we can compare these estimates to past performance, and see how Osmotica Pharmaceuticals forecasts compare to the wider market's forecast performance. We would highlight that sales are expected to reverse, with the forecast 20% revenue decline a notable change from historical growth of 4.2% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 5.5% annually for the foreseeable future. It's pretty clear that Osmotica Pharmaceuticals's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest takeaway for us is that analysts expect Osmotica Pharmaceuticals to be lossmaking next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Osmotica Pharmaceuticals's revenues are expected to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Osmotica Pharmaceuticals's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Osmotica Pharmaceuticals going out to 2023, and you can see them free on our platform here.
It might also be worth considering whether Osmotica Pharmaceuticals's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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