In this article, I will take a look at Cytosorbents Corporation's (NASDAQ:CTSO) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of CTSO's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Despite a decline, did CTSO underperform the long-term trend and the industry?
CTSO is loss-making, with the most recent trailing twelve-month earnings of -US$16.8m (from 30 June 2019), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -US$11.3m. Each year, for the past five years CTSO has seen an annual increase in operating expense growth, outpacing revenue growth of 40%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Looking at growth from a sector-level, the US medical equipment industry has been growing its average earnings by double-digit 29% over the past year,
Given that Cytosorbents is currently unprofitable, with operating expenses (opex) growing year-on-year at 25%, it may need to raise more cash over the next year. It currently has US$16m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$32m in the latest twelve months. Although this is a relatively simplistic calculation, and Cytosorbents may reduce its costs or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
Cytosorbents's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most valuable step is to assess company-specific issues Cytosorbents may be facing and whether management guidance has consistently been met in the past. You should continue to research Cytosorbents to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CTSO’s future growth? Take a look at our free research report of analyst consensus for CTSO’s outlook.
- Financial Health: Are CTSO’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.
- 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 30 June 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.