Investors in Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) had a good week, as its shares rose 7.0% to close at US$1.83 following the release of its quarterly results. It was a credible result overall, with revenues of US$56m and statutory earnings per share of US$0.13 both in line with analyst estimates, showing that Rigel Pharmaceuticals is executing in line with expectations. The 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 the analysts have changed their mind on Rigel Pharmaceuticals after the latest results.
Taking into account the latest results, the consensus forecast from Rigel Pharmaceuticals' six analysts is for revenues of US$105.3m in 2020, which would reflect a satisfactory 2.8% improvement in sales compared to the last 12 months. Losses are forecast to balloon 55% to US$0.26 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$113.2m and losses of US$0.21 per share in 2020. So it's pretty clear the analysts have mixed opinions on Rigel Pharmaceuticals 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$7.14, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. The most optimistic Rigel Pharmaceuticals analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$5.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. It's pretty clear that there is an expectation that Rigel Pharmaceuticals' revenue growth will slow down substantially, with revenues next year expected to grow 2.8%, compared to a historical growth rate of 33% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 19% next year. Factoring in the forecast slowdown in growth, it seems obvious that Rigel Pharmaceuticals is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Rigel Pharmaceuticals. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Rigel Pharmaceuticals 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 1 warning sign for Rigel Pharmaceuticals that we have uncovered.
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