Heron Therapeutics, Inc. (NASDAQ:HRTX) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Results overall were mixed; even though revenues of US$20m beat expectations by 16%, statutory losses were US$0.64 per share, 2.1% larger than what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Heron Therapeutics’ eight analysts are now forecasting revenues of US$151.9m in 2021. This would be a substantial 47% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 33% to US$1.65. Before this earnings announcement, the analysts had been modelling revenues of US$151.4m and losses of US$1.69 per share in 2021. 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.
The average price target held steady at US$31.22, seeming to indicate that business is performing in line with expectations. 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. There are some variant perceptions on Heron Therapeutics, with the most bullish analyst valuing it at US$70.00 and the most bearish at US$20.00 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Next year brings more of the same, according to the analysts, with revenue forecast to grow 47%, in line with its 47% annual growth over the past three years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 20% next year. So although Heron Therapeutics is expected to maintain its revenue growth rate, it’s definitely 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.
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. At Simply Wall St, we have a full range of analyst estimates for Heron Therapeutics going out to 2024, and you can see them free on our platform here..
We don’t want to rain on the parade too much, but we did also find 1 warning sign for Heron Therapeutics that you need to be mindful of.
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.