The investors in Recursion Pharmaceuticals, Inc.'s (NASDAQ:RXRX) will be rubbing their hands together with glee today, after the share price leapt 21% to US$12.04 in the week following its quarterly results. Revenues of US$7.7m crushed expectations, although expenses increased commensurately, with statutory losses hitting US$0.38 per share, -10% above what the analysts expected. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Recursion Pharmaceuticals after the latest results.
Taking into account the latest results, the most recent consensus for Recursion Pharmaceuticals from five analysts is for revenues of US$46.9m in 2022 which, if met, would be a huge 159% increase on its sales over the past 12 months. Per-share losses are supposed to see a sharp uptick, reaching US$1.54. Before this latest report, the consensus had been expecting revenues of US$44.5m and US$1.53 per share in losses.
The consensus price target held steady at US$16.20despite the upgrade to revenue forecasts and ongoing losses. The analysts seems to think the business is otherwise performing roughly in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Recursion Pharmaceuticals at US$38.00 per share, while the most bearish prices it at US$8.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. The analysts are definitely expecting Recursion Pharmaceuticals' growth to accelerate, with the forecast 6x annualised growth to the end of 2022 ranking favourably alongside historical growth of 105% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Recursion Pharmaceuticals is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 estimates - from multiple Recursion Pharmaceuticals analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Recursion Pharmaceuticals has 4 warning signs (and 1 which is a bit concerning) we think you should know about.
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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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