It’s been a good week for Guardant Health, Inc. (NASDAQ:GH) shareholders, because the company has just released its latest third-quarter results, and the shares gained 5.9% to US$113. Guardant Health beat revenue forecasts by a solid 13%, hitting US$75m. Statutory losses also blew out, with the loss per share reaching US$0.78, some 96% 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Guardant Health’s nine analysts are now forecasting revenues of US$376.9m in 2021. This would be a sizeable 39% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 37% to US$1.22. Before this latest report, the consensus had been expecting revenues of US$380.0m and US$1.27 per share in losses. It looks like there’s been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers were unchanged.
There’s been no major changes to the consensus price target of US$119, suggesting that reduced loss estimates are not enough to have a long-term positive impact on the stock’s valuation. 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 Guardant Health analyst has a price target of US$135 per share, while the most pessimistic values it at US$100.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Guardant Health is an easy business to forecast or the the analysts are all using similar assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Guardant Health’s revenue growth is expected to slow, with forecast 39% increase next year well below the historical 61%p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.6% next year. Even after the forecast slowdown in growth, it seems obvious that Guardant Health is also expected to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations – and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Guardant Health going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we’ve spotted 3 warning signs for Guardant Health you should know about.
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.