Scholar Rock Holding Corporation (NASDAQ:SRRK) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year’s forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.
Following the latest upgrade, the seven analysts covering Scholar Rock Holding provided consensus estimates of US$33m revenue in 2022, which would reflect a concerning 30% decline on its sales over the past 12 months. The loss per share is expected to ameliorate slightly, reducing to US$3.01. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$19m and losses of US$3.91 per share in 2022. We can see there’s definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year’s revenue estimates, while at the same time reducing their loss estimates.
Yet despite these upgrades, the analysts cut their price target 28% to US$32.00, implicitly signalling that the ongoing losses are likely to weigh negatively on Scholar Rock Holding’s valuation. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Scholar Rock Holding, with the most bullish analyst valuing it at US$55.00 and the most bearish at US$6.00 per share. So we wouldn’t be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn’t rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 38% by the end of 2022. This indicates a significant reduction from annual growth of 37% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 12% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Scholar Rock Holding is expected to lag the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Scholar Rock Holding is moving incrementally towards profitability. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. A lower price target is not intuitively what we would expect from a company whose business prospects are improving – at least judging by these forecasts – but if the underlying fundamentals are strong, Scholar Rock Holding could be one for the watch list.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Scholar Rock Holding going out to 2024, and you can see them free on our platform here..
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.