Last week, you might have seen that Nephros, Inc. (NASDAQ:NEPH) released its second-quarter result to the market. The early response was not positive, with shares down 9.4% to US$1.69 in the past week. It was a respectable set of results; while revenues of US$2.9m were in line with analyst predictions, statutory losses were 16% smaller than expected, with Nephros losing US$0.12 per share. 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.
Following the latest results, Nephros' three analysts are now forecasting revenues of US$11.0m in 2022. This would be a credible 4.6% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$0.50. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$11.1m and losses of US$0.60 per share in 2022. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a notable improvement in losses per share in particular.
The consensus price target fell 33% to US$5.13despite the forecast for smaller losses next year. It looks like the ongoing lack of profitability is starting to weigh on valuations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Nephros analyst has a price target of US$5.25 per share, while the most pessimistic values it at US$5.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Nephros' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 9.4% growth on an annualised basis. This is compared to a historical growth rate of 21% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.5% per year. Even after the forecast slowdown in growth, it seems obvious that Nephros is also expected to grow faster than 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. 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. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Nephros' future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Nephros going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Nephros that you should be aware of.
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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.
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