After reading Cellmid Limited’s (ASX:CDY) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Cellmid
Was CDY weak performance lately part of a long-term decline?
I look at data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This enables me to examine many different companies in a uniform manner using new information. For Cellmid, its latest trailing-twelve-month earnings is -AU$4.05M, which, against last year’s figure, has become more negative. Since these figures are fairly short-term thinking, I’ve computed an annualized five-year value for CDY’s earnings, which stands at -AU$2.63M. This doesn’t look much better, as earnings seem to have consistently been getting more and more negative over time.
We can further evaluate Cellmid’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Cellmid’s top-line has grown by 40.80% on average, signalling that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Viewing growth from a sector-level, the Australian biotechs industry has been enduring some headwinds over the prior year, leading to an average earnings drop of -11.93%. This is a momentous change, given that the industry has constantly been delivering a a robust growth of 21.28% in the previous five years. This shows that whatever recent headwind the industry is facing, it’s hitting Cellmid harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most valuable step is to examine company-specific issues Cellmid may be facing and whether management guidance has regularly been met in the past. You should continue to research Cellmid to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.