Consensus EPS estimates for Adagene Inc. (NASDAQ:ADAG) just dropped dramatically
The latest analyst coverage could portend a bad day for Adagene Inc. (NASDAQ:ADAG), with analysts making broad cuts to their statutory estimates that could leave shareholders a bit shocked. Both revenue and earnings per share (EPS) forecasts have been revised down as analysts see gray clouds on the horizon.
Following the downgrade, the most recent consensus for Adagene from its three analysts is for revenue of US$14 million in 2022, which, if achieved, would represent a satisfying increase of 7.9% of its sales over the last 12 months. Losses should hold at around US$1.92. Yet before the latest estimates, analysts were forecasting revenue of US$19 million and losses of US$1.29 per share in 2022. As a result, there has been a sharp change in sentiment, with analysts administering a cut significant in this year’s revenue estimates, while increasing their loss per share forecast.
See our latest review for Adagene
The consensus price target fell 29% to US$16.03 as analysts were clearly concerned about the company following weaker revenue and earnings outlook. It might also be instructive to look at the range of analysts’ estimates, to gauge how different the outlier opinions are from the mean. The most optimistic Adagene analyst has a price target of US$26.00 per share, while the most pessimistic puts it at US$7.00. So we wouldn’t give analysts’ price targets too much credence in this case, as there are clearly very different views on what kind of performance this activity can generate. 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.
Another way to view these estimates is in the context of the bigger picture, such as how the forecast compares to past performance, and whether the forecast is more or less optimistic compared to other companies in the industry. We emphasize that Adagene’s revenue growth is expected to slow, with the projected annualized growth rate of 16% through the end of 2022 being well below last year’s historic growth of 628%. Juxtapose that to other companies in the industry with analyst coverage, which are expected to grow revenue (in total) by 16% annually. So it’s pretty clear that while Adagene’s revenue growth is expected to slow, it should grow at roughly the same rate as the industry.
The most important thing to note from this downgrade is that the consensus has raised its loss forecast this year, suggesting that all may not be well at Adagene. Unfortunately, they also lowered their sales forecast, but the business is still expected to grow at roughly the same rate as the market itself. After such a drastic shift in sentiment from analysts, we would understand if readers were a bit wary of Adagene.
Even so, the longer-term trajectory of the company is far more important to the creation of shareholder value. We have estimates – from several Adagene analysts – going out to 2024, and you can see them for free on our platform here.
Of course, see the management of the company invest large sums of money in a stock can be just as useful as knowing if analysts are lowering their estimates. So you can also search this free list of stocks that insiders buy.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
Valuation is complex, but we help make it simple.
Find out if Adagene is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
See the free analysis