The quarterly results for Homology Medicines, Inc. (NASDAQ:FIXX) were released last week, making it a good time to revisit its performance. Sales of US$588k came in 3.2% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.78, a 13% miss. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Homology Medicines after the latest results.
Taking into account the latest results, the consensus forecast from Homology Medicines' six analysts is for revenues of US$3.15m in 2020, which would reflect a major 59% improvement in sales compared to the last 12 months. Losses are expected to increase substantially, hitting US$3.06 per share. Before this latest report, the consensus had been expecting revenues of US$5.09m and US$2.64 per share in losses. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
There was no major change to the consensus price target of US$32.86, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Homology Medicines, with the most bullish analyst valuing it at US$37.00 and the most bearish at US$24.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Homology Medicines is forecast to grow faster in the future than it has in the past, with revenues expected to grow 59%. If achieved, this would be a much better result than the 55% annual decline over the past year. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 21% next year. Not only are Homology Medicines' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that Homology Medicines' revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Homology Medicines going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Homology Medicines that you should be aware of.
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