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Radius Health, Inc. (NASDAQ:RDUS) last week reported its latest third-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues of US$78m came in a modest 5.9% below forecasts. Statutory losses were a relative bright spot though, with a per-share loss of US$0.14 coming in a substantial 34% smaller than what the analysts had expected. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the seven analysts covering Radius Health are now predicting revenues of US$277.9m in 2021. If met, this would reflect a substantial 20% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 30% to US$1.70. Before this latest report, the consensus had been expecting revenues of US$284.4m and US$1.33 per share in losses. So it's pretty clear the analysts have mixed opinions on Radius Health after this update; revenues were downgraded and per-share losses expected to increase.
There was no major change to the consensus price target of US$20.25, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Radius Health at US$25.00 per share, while the most bearish prices it at US$14.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. We would highlight that Radius Health's revenue growth is expected to slow, with forecast 20% increase next year well below the historical 64%p.a. growth over the last three years. Compare this to the 523 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 21% per year. So it's pretty clear that, while Radius Health's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Radius Health. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Radius Health. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Radius Health analysts - going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Radius Health's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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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