Investors in FibroGen, Inc. (NASDAQ:FGEN) had a good week, as its shares rose 7.6% to close at US$41.28 following the release of its third-quarter results. It was a shocking result from a sales perspective, with revenues falling 28% short of analyst expectations. There was one bright spot though, with FibroGen reporting a surprise (statutory) profit of US$0.35, defying analyst expectations of a loss. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from FibroGen's nine analysts is for revenues of US$490.7m in 2021, which would reflect a major 311% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 78% to US$0.56. Before this latest report, the consensus had been expecting revenues of US$487.5m and US$0.59 per share in losses. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for next year.
The average price target held steady at US$62.13, seeming to indicate that business is performing in line with expectations. 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. There are some variant perceptions on FibroGen, with the most bullish analyst valuing it at US$90.00 and the most bearish at US$44.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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 FibroGen's rate of growth is expected to accelerate meaningfully, with the forecast 3x revenue growth noticeably faster than its historical growth of 6.5%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 20% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that FibroGen is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. 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. The consensus price target held steady at US$62.13, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on FibroGen. Long-term earnings power is much more important than next year's profits. We have forecasts for FibroGen going out to 2024, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with FibroGen (at least 1 which is significant) , and understanding them should be part of your investment process.
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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