DURECT Corporation (NASDAQ:DRRX) just reported earnings and analysts cut their price target
Shareholders may have noticed that DURECT Corporation (NASDAQ:DRRX) filed its quarterly results this time around last week. The early response was not positive, with shares down 5.4% to US$0.43 last week. It wasn’t the best result, with continued losses and earnings of US$1.9 million below analysts’ forecasts. The losses were a relative bright spot, however, with a statutory loss per share of US$0.05 slightly lower than analysts’ forecasts. Analysts typically update their forecasts with each earnings report, and we can judge from their estimates if their view of the business has changed or if there are new concerns to consider. So we’ve collected the latest post-earnings statutory consensus estimates to see what might be in store for next year.
Discover our latest analysis for DURECT
Based on the latest results, DURECT’s three analyst consensus forecast calls for revenue of $14.6 million in 2022, which would reflect a modest 6.9% improvement in sales over the past 12 months. Losses per share are expected to rise sharply, reaching US$0.18. Prior to this earnings announcement, analysts had modeled revenue of US$15.3 million and losses of US$0.16 per share in 2022. So it’s pretty clear that analysts have mixed opinions on DURECT after this update ; revenue has been revised down and losses per share are expected to increase.
The average price target fell 5.6% to US$5.67, implicitly signaling that lower earnings per share is a leading indicator of DURECT’s valuation. Fixing on a single price target, however, can be unwise because the consensus target is actually the average of the analysts’ price targets. As a result, some investors like to look at the range of estimates to see if there are any differing opinions on the company’s valuation. Currently, the most bullish analyst values DURECT at US$6.00 per share, while the most bearish one values it at US$5.00. Even so, with a relatively close group of estimates, it seems that analysts are quite confident in their valuations, suggesting that DURECT is an easy-to-predict company or that analysts are all using similar assumptions.
Of course, another way to look at these predictions is to put them in context with the industry itself. For example, we have noticed that DURECT’s growth rate is expected to accelerate significantly, with revenue expected to show 9.4% growth by the end of 2022 on an annualized basis. That’s well above its historic decline of 6.1% per year over the past five years. Compare that to analyst estimates for the industry as a whole, which suggest that (in total) industry revenue is expected to grow by 3.2% annually. Not only is DURECT’s revenue expected to improve, but it looks like analysts are also expecting it to grow faster than the industry as a whole.
The most important thing to remember is that analysts have raised their loss per share estimates for next year. Unfortunately, they have also lowered their revenue estimates, but the latest forecasts still imply that the company will grow faster than the industry as a whole. Additionally, analysts have also cut their price targets, suggesting the latest news has led to greater pessimism about the company’s intrinsic value.
Continuing this thinking, we believe that the company’s long-term outlook is much more relevant than next year’s results. We have predictions for DURECT until 2024, and you can see them for free on our platform here.
However, before you get too excited, we found out 2 warning signs for DURECT of which you should be aware.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.