It's been a pretty great week for Schrödinger, Inc. (NASDAQ:SDGR) shareholders, with its shares surging 11% to US$54.00 in the week since its latest quarterly results. Schrödinger beat revenue forecasts by a solid 10%, hitting US$26m. Statutory losses also blew out, with the loss per share reaching US$0.34, some 34% bigger than the analysts expected. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from Schrödinger's four analysts is for revenues of US$107.0m in 2020, which would reflect a meaningful 18% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 50% to US$1.12. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$108.2m and losses of US$0.89 per share in 2020. While this year's revenue estimates held steady, there was also a loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
Although the analysts are now forecasting higher losses, the average price target rose 15% to 50, which could indicate that these losses are expected to be "one-off", or are not anticipated to have a longer-term impact on the business. 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. Currently, the most bullish analyst values Schrödinger at US$67.00 per share, while the most bearish prices it at US$50.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Schrödinger's revenue growth will slow down substantially, with revenues next year expected to grow 18%, compared to a historical growth rate of 31% over the past year. Compare this to the 77 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 17% per year. Factoring in the forecast slowdown in growth, it looks like Schrödinger is forecast to grow at about the same rate as 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. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Schrödinger. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Schrödinger going out to 2024, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Schrödinger , and understanding it should be part of your investment process.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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