The analysts covering Ardelyx, Inc. (NASDAQ:ARDX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Bidders are definitely seeing a different story, with the stock price of US$5.77 reflecting a 13% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company’s shares.
After the downgrade, the five analysts covering Ardelyx are now predicting revenues of US$29m in 2021. If met, this would reflect a major 243% improvement in sales compared to the last 12 months. Losses are forecast to hold steady at around US$1.17. Yet before this consensus update, the analysts had been forecasting revenues of US$42m and losses of US$1.09 per share in 2021. Ergo, there’s been a clear change in sentiment, with the analysts administering a notable cut to next year’s revenue estimates, while at the same time increasing their loss per share forecasts.
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. For example, we noticed that Ardelyx’s rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 243%, well above its historical decline of 17% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 20% next year. So it looks like Ardelyx is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the stark change in sentiment, we’d understand if investors became more cautious on Ardelyx after today.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Ardelyx analysts – going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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. 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.