Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) Just Reported And Analysts Have Been Cutting Their Estimates
The yearly results for Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) were released last week, making it a good time to revisit its performance. Sales hit US$12m in line with forecasts, although the company reported a statutory loss per share of US$1.30 that was somewhat smaller than the analysts 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Check out our latest analysis for Verrica Pharmaceuticals
Taking into account the latest results, the current consensus from Verrica Pharmaceuticals' six analysts is for revenues of US$13.9m in 2022, which would reflect a meaningful 16% increase on its sales over the past 12 months. Losses are forecast to balloon 58% to US$2.01 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$20.8m and losses of US$2.09 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue forecasts while also reducing the estimated losses the business will incur.
There was no major change to the US$19.17average price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. 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 Verrica Pharmaceuticals analyst has a price target of US$25.00 per share, while the most pessimistic values it at US$16.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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 Verrica Pharmaceuticals' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 16% growth on an annualised basis. This is compared to a historical growth rate of 95% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.3% annually. So it's pretty clear that, while Verrica Pharmaceuticals' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
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. The consensus price target held steady at US$19.17, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Verrica Pharmaceuticals going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Verrica Pharmaceuticals that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
