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One thing we could say about the analysts on Lannett Company, Inc. (NYSE:LCI) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the downgrade, the consensus from two analysts covering Lannett Company is for revenues of US$349m in 2022, implying a definite 14% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$390m of revenue in 2022. The consensus view seems to have become more pessimistic on Lannett Company, noting the substantial drop in revenue estimates in this update.
Notably, the analysts have cut their price target 40% to US$3.00, suggesting concerns around Lannett Company's valuation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Over the past five years, revenues have declined around 7.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 26% decline in revenue until the end of 2022. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.1% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Lannett Company to suffer worse than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Lannett Company this year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Lannett Company's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Lannett Company going forwards.
Unsatisfied? We have estimates for Lannett Company from its two analysts out until 2023, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.