A week ago, iRhythm Technologies, Inc. (NASDAQ:IRTC) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. iRhythm Technologies outperformed on both revenues and the expected loss per share, with revenues of US$72m beating estimates by 15%. Statutory losses were US$0.17, 69% smaller thanthe 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.
Taking into account the latest results, the current consensus from iRhythm Technologies’ ten analysts is for revenues of US$368.9m in 2021, which would reflect a major 50% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 64% to US$0.68. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$358.6m and losses of US$0.63 per share in 2021. Overall it looks as though the analysts were a bit mixed on the latest consensus updates. Although there was a nice uplift to revenue, the consensus also made a to its losses per share forecasts.
The average price target rose 8.0% to US$251, even thoughthe analysts have been updating their forecasts to show higher revenues and higher forecast 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. There are some variant perceptions on iRhythm Technologies, with the most bullish analyst valuing it at US$273 and the most bearish at US$200 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It’s clear from the latest estimates that iRhythm Technologies’ rate of growth is expected to accelerate meaningfully, with the forecast 50% revenue growth noticeably faster than its historical growth of 36%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.9% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect iRhythm Technologies to grow faster than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at iRhythm Technologies. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn’t be too quick to come to a conclusion on iRhythm Technologies. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for iRhythm Technologies going out to 2022, and you can see them free on our platform here..
You still need to take note of risks, for example – iRhythm Technologies has 2 warning signs we think you should be aware 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.