Shareholders in Synlogic, Inc. (NASDAQ:SYBX) had a terrible week, as shares crashed 24% to US$1.59 in the week since its latest full-year results. Revenues were 66% better than analyst models forecast, at US$2.2m. Perhaps unsurprisingly, statutory losses were also slightly larger than expected, at US$1.70 per share, reflecting the higher costs which were likely incurred in generating that revenue. Earnings are an important time for investors, as they can track a company's performance, look at what top 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 analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the seven analysts covering Synlogic provided consensus estimates of US$1.11m revenue in 2020, which would reflect a substantial 50% decline on its sales over the past 12 months. Before this latest report, the consensus had been expecting revenues of US$1.39m and US$1.64 per share in losses. So there's been quite a change-up of views after the latest results, with analysts making a serious cut to their revenue forecasts while also granting a to the earnings per share numbers.
The consensus price target fell 13% to US$7.57, with analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Synlogic analyst has a price target of US$13.00 per share, while the most pessimistic values it at US$2.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
In addition, we can look to Synlogic's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that sales are expected to reverse, with the forecast 50% revenue decline a notable change from historical growth of 17% over the last three years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 16% next year. It's pretty clear that Synlogic's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Synlogic is moving incrementally towards profitability. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Synlogic's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Synlogic analysts - going out to 2024, and you can see them free on our platform here.
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