Analysts Have Been Trimming Their Exagen Inc. (NASDAQ:XGN) Price Target After Its Latest Report
It's been a mediocre week for Exagen Inc. (NASDAQ:XGN) shareholders, with the stock dropping 17% to US$13.12 in the week since its latest full-year results. It was a pretty bad result overall; while revenues were in line with expectations at US$40m, statutory losses exploded to US$8.46 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for Exagen
After the latest results, the consensus from Exagen's three analysts is for revenues of US$31.2m in 2020, which would reflect a concerning 23% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 87% to US$1.14. Before this latest report, the consensus had been expecting revenues of US$55.0m and US$1.56 per share in losses. We can see there's definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to next year's revenue estimates, while at the same time reducing their loss estimates.
The analysts have cut their price target 32% to US$18.00 per share, suggesting that the declining revenue was a more crucial indicator than the forecast reduction in losses. 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. There are some variant perceptions on Exagen, with the most bullish analyst valuing it at US$19.00 and the most bearish at US$17.00 per share. This is a very narrow spread of estimates, implying either that Exagen is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 23%, a significant reduction from annual growth of 20% 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 6.6% next year. It's pretty clear that Exagen's revenues are expected to perform substantially worse 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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Exagen going out to 2024, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Exagen you should be aware of.
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