Investors in MEI Pharma, Inc. (NASDAQ:MEIP) had a good week, as its shares rose 3.8% to close at US$2.74 following the release of its third-quarter results. Statutory results overall were mixed, with revenues coming in 28% lower than the analysts predicted. What's really surprising is that losses of US$0.04 per share were 70% smaller than what was predicted. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from MEI Pharma's five analysts is for revenues of US$26.7m in 2021, which would reflect a major 488% improvement in sales compared to the last 12 months. Losses are forecast to balloon 68% to US$0.50 per share. Before this latest report, the consensus had been expecting revenues of US$29.2m and US$0.55 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 consensus price target rose 5.8% to US$9.08, with the analysts increasingly optimistic about shrinking losses, despite the expected decline in sales. 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. Currently, the most bullish analyst values MEI Pharma at US$13.00 per share, while the most bearish prices it at US$5.50. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that MEI Pharma is forecast to grow faster in the future than it has in the past, with revenues expected to grow 488%. If achieved, this would be a much better result than the 71% annual decline over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 20% per year. So it looks like MEI Pharma is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Still, earnings are more important to the intrinsic value of the business. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple MEI Pharma analysts - going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for MEI Pharma that we have uncovered.
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