Market forces rained on the parade of PureTech Health plc (LON:PRTC) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the consensus from PureTech Health's four analysts is for revenues of US$11m in 2022, which would reflect a painful 42% decline in sales compared to the last year of performance. Prior to the latest estimates, the analysts were forecasting revenues of US$12m in 2022. It looks like forecasts have become a fair bit less optimistic on PureTech Health, given the substantial drop in revenue estimates.
There was no particular change to the consensus price target of US$7.81, with PureTech Health's latest outlook seemingly not enough to result in a change of valuation. 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 PureTech Health analyst has a price target of US$9.29 per share, while the most pessimistic values it at US$4.84. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await PureTech Health shareholders.
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 67% by the end of 2022. This indicates a significant reduction from annual growth of 16% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 15% annually for the foreseeable future. It's pretty clear that PureTech Health's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of PureTech Health going forwards.
Of course, this isn't the full story. We have estimates for PureTech Health from its four analysts out until 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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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