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Roivant Sciences Ltd. (NASDAQ:ROIV) Analysts Are Cutting Their Estimates: Here's What You Need To Know

·3-min read

It's been a good week for Roivant Sciences Ltd. (NASDAQ:ROIV) shareholders, because the company has just released its latest annual results, and the shares gained 3.2% to US$4.49. Revenues beat expectations, with US$61m in sales being 16% above estimates. The company still lost US$1.26 per share, tracking roughly in line with expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Roivant Sciences after the latest results.

Check out our latest analysis for Roivant Sciences

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After the latest results, the consensus from Roivant Sciences' eight analysts is for revenues of US$50.4m in 2023, which would reflect a definite 18% decline in sales compared to the last year of performance. Losses are expected to be contained, narrowing 11% from last year to US$1.38. Before this latest report, the consensus had been expecting revenues of US$62.1m and US$1.44 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 consensus price target was broadly unchanged at US$11.57, implying that the business is performing roughly in line with expectations, despite adjustments to both revenue and earnings estimates. 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. The most optimistic Roivant Sciences analyst has a price target of US$16.00 per share, while the most pessimistic values it at US$6.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 18% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 25% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.9% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Roivant Sciences is expected to lag 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. Still, earnings per share are more important to value creation for shareholders. 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Roivant Sciences. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Roivant Sciences going out to 2025, and you can see them free on our platform here..

Even so, be aware that Roivant Sciences is showing 3 warning signs in our investment analysis , you should know about...

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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