One thing we could say about the analysts on NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At US$17.09, shares are up 5.8% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
After the downgrade, the consensus from NGM Biopharmaceuticals' six analysts is for revenues of US$44m in 2022, which would reflect a stressful 37% decline in sales compared to the last year of performance. Losses are supposed to balloon 35% to US$2.27 per share. However, before this estimates update, the consensus had been expecting revenues of US$49m and US$2.19 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
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. One more thing stood out to us about these estimates, and it's the idea that NGM Biopharmaceuticals' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 60% to the end of 2022. This tops off a historical decline of 18% a year over the past three years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.5% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect NGM Biopharmaceuticals to suffer worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that NGM Biopharmaceuticals' revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on NGM Biopharmaceuticals after today.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with NGM Biopharmaceuticals' business, like dilutive stock issuance over the past year. Learn more, and discover the 2 other risks we've identified, for 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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