Forecast: Analysts Think Cipher Pharmaceuticals Inc.'s (TSE:CPH) Business Prospects Have Improved Drastically

Cipher Pharmaceuticals Inc. (TSE:CPH) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Cipher Pharmaceuticals has also found favour with investors, with the stock up a noteworthy 22% to CA$2.03 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following the upgrade, the latest consensus from Cipher Pharmaceuticals' two analysts is for revenues of US$23m in 2021, which would reflect a reasonable 3.5% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 64% to US$0.33. Before this latest update, the analysts had been forecasting revenues of US$21m and earnings per share (EPS) of US$0.26 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

View our latest analysis for Cipher Pharmaceuticals

With these upgrades, we're not surprised to see that the analysts have lifted their price target 73% to CA$2.42 per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Cipher Pharmaceuticals analyst has a price target of CA$3.50 per share, while the most pessimistic values it at CA$0.95. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that Cipher Pharmaceuticals is forecast to grow faster in the future than it has in the past, with revenues expected to display 7.1% annualised growth until the end of 2021. If achieved, this would be a much better result than the 11% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 32% per year. So although Cipher Pharmaceuticals' revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Cipher Pharmaceuticals could be worth investigating further.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Cipher Pharmaceuticals going out as far as 2023, and you can see them free on our platform here.

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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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