Arcus Biosciences, Inc. (NYSE:RCUS) 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. The stock price has risen 4.8% to US$16.71 over the past week, suggesting investors are becoming more optimistic. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the upgrade, the most recent consensus for Arcus Biosciences from its nine analysts is for revenues of US$284m in 2024 which, if met, would be a solid 20% increase on its sales over the past 12 months. Losses are supposed to balloon 28% to US$3.26 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$187m and losses of US$3.85 per share in 2024. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$39.11, implying that their latest estimates don't have a long term impact on what they think the stock is worth.
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. It's pretty clear that there is an expectation that Arcus Biosciences' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 27% growth on an annualised basis. This is compared to a historical growth rate of 35% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 18% annually. So it's pretty clear that, while Arcus Biosciences' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Arcus Biosciences is moving incrementally towards profitability. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Arcus Biosciences.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Arcus Biosciences analysts - going out to 2026, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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