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One of the biggest stories of last week was how Homology Medicines, Inc. (NASDAQ:FIXX) shares plunged 28% in the week since its latest yearly results, closing yesterday at US$14.89. Revenues were a bright spot, with US$1.7m in sales arriving 8.0% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$2.47, some 4.7% below consensus predictions. 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 analysts have changed their mind on Homology Medicines after the latest results.
After the latest results, the consensus from Homology Medicines's five analysts is for revenues of US$1.26m in 2020, which would reflect a painful 24% decline in sales compared to the last year of performance. Statutory losses are expected to reduce, shrinking 15% from last year to US$2.83. Yet prior to the latest earnings, analysts had been forecasting revenues of US$4.84m and losses of US$2.84 per share in 2020. So there's been quite a change-up of views after the latest results, with analysts making a serious cut to their revenue forecasts while also granting a to the earnings per share numbers.
The consensus price target was broadly unchanged at US$33.83, implying that the business is performing roughly in line with expectations, despite a downwards adjustment to forecast sales next year. 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. Currently, the most bullish analyst values Homology Medicines at US$37.00 per share, while the most bearish prices it at US$29.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Over the past year, revenues have declined around 69% annually. On the bright side, analysts expect the decline to level off somewhat, with the forecast for a 24% decline in revenue next year. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 16% next year. So it's pretty clear that, while it does have declining revenues, at least analysts expect Homology Medicines to suffer less severely than the wider market.
The Bottom Line
The most important thing to note from these estimates is that the consensus increased its forecast losses next year, suggesting all may not be well at Homology Medicines. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$33.83, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Homology Medicines going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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