Investors in Chiasma, Inc. (NASDAQ:CHMA) had a good week, as its shares rose 7.7% to close at US$4.04 following the release of its quarterly results. 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.
After the latest results, the five analysts covering Chiasma are now predicting revenues of US$32.5m in 2021. If met, this would reflect a huge 22,789% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 31% to US$0.98. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$35.2m and losses of US$1.03 per share in 2021. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for next year.
The analysts have cut their price target 16% to US$13.60per share, suggesting that the declining revenue was a more crucial indicator than the forecast reduction in losses. 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. Currently, the most bullish analyst values Chiasma at US$19.00 per share, while the most bearish prices it at US$8.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
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. It’s clear from the latest estimates that Chiasma’s rate of growth is expected to accelerate meaningfully, with the forecast exponential revenue growth noticeably faster than its historical growth of 25% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.7% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Chiasma is expected to grow much faster than its industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. They also downgraded their revenue estimates, although industry data suggests that Chiasma’s revenues are expected to grow faster than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
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 Chiasma going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for Chiasma (1 is a bit concerning!) that you need to take into consideration.
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.