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Earnings Release: Here's Why Analysts Cut Their Organogenesis Holdings Inc. Price Target To US$8.50

Simply Wall St
·4 mins read

It's been a pretty great week for Organogenesis Holdings Inc. (NASDAQ:ORGO) shareholders, with its shares surging 13% to US$3.98 in the week since its latest full-year results. The statutory results were not great - while revenues of US$261m were in line with expectations,Organogenesis Holdings lost US$0.44 a share in the process. 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

View our latest analysis for Organogenesis Holdings

NasdaqCM:ORGO Past and Future Earnings, March 13th 2020
NasdaqCM:ORGO Past and Future Earnings, March 13th 2020

After the latest results, the four analysts covering Organogenesis Holdings are now predicting revenues of US$275.3m in 2020. If met, this would reflect a credible 5.5% improvement in sales compared to the last 12 months. Statutory losses are expected to increase substantially, hitting US$0.37. per share. Before this earnings announcement, analysts had been forecasting revenues of US$274.2m and losses of US$0.45 per share in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the solid gain to earnings per share expectations following these results.

The consensus price target fell 15% to US$8.50 despite the forecast for smaller losses next year. It looks like the ongoing lack of profitability is starting to weigh on analyst valuations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Organogenesis Holdings analyst has a price target of US$9.00 per share, while the most pessimistic values it at US$8.00. 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.

In addition, we can look to Organogenesis Holdings's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Organogenesis Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 5.5%, compared to a historical growth rate of 18% over the past three years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 16% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Organogenesis Holdings.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Organogenesis Holdings going out to 2024, and you can see them free on our platform here.

You can also view our analysis of Organogenesis Holdings's balance sheet, and whether we think Organogenesis Holdings is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.