Today I will take a look at Probiotec Limited’s (ASX:PBP) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the pharmaceuticals industry performed. As an investor, I find it beneficial to assess PBP’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for Probiotec
Did PBP beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to analyze different companies in a uniform manner using new information. For Probiotec, its most recent trailing-twelve-month earnings is AU$3.08M, which, in comparison to the previous year’s figure, has grown by a somewhat muted 7.26%. Given that these figures are fairly short-term, I’ve calculated an annualized five-year figure for PBP’s net income, which stands at AU$1.02M This means that, on average, Probiotec has been able to consistently raise its bottom line over the past couple of years as well.
How has it been able to do this? Let’s see if it is merely because of an industry uplift, or if Probiotec has experienced some company-specific growth. In the last couple of years, Probiotec increased bottom-line, while its top-line fell, by successfully controlling its costs. This has led to to a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian pharmaceuticals industry has been enduring some headwinds in the prior year, leading to an average earnings drop of -14.05%. This is a major change, given that the industry has been delivering a positive rate of 4.35%, on average, over the last five years. This shows that any recent headwind the industry is facing, the impact on Probiotec has been softer relative to its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Probiotec to get a better picture of the stock by looking at:
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Financial Health: Is PBP’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
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Valuation: What is PBP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PBP is currently mispriced by the market.
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Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.