It’s shaping up to be a tough period for Xenon Pharmaceuticals Inc. (NASDAQ:XENE), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Statutory earnings fell substantially short of expectations, with revenues of US$6.6m missing forecasts by 44%. Losses exploded, with a per-share loss of US$0.25 some 130% below prior forecasts. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the consensus from Xenon Pharmaceuticals’ eight analysts is for revenues of US$20.9m in 2021, which would reflect a sizeable 31% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching US$1.23 per share. Before this earnings announcement, the analysts had been modelling revenues of US$23.7m and losses of US$1.35 per share in 2021. So there’s been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue forecasts while also reducing the estimated losses the business will incur.
There was no major change to the US$23.00average price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Xenon Pharmaceuticals analyst has a price target of US$25.00 per share, while the most pessimistic values it at US$22.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 31%, a significant reduction from annual growth of 22% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 21% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Xenon Pharmaceuticals is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Yet – earnings are more important to the intrinsic value of the business. The consensus price target held steady at US$23.00, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn’t be too quick to come to a conclusion on Xenon Pharmaceuticals. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Xenon Pharmaceuticals analysts – 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 Xenon Pharmaceuticals (1 shouldn’t be ignored!) 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.