With A -40.65% Earnings Drop Lately, Did Insmed Incorporated (NASDAQ:INSM) Underperform Its Industry?
For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Insmed Incorporated (NASDAQ:INSM) useful as an attempt to give more color around how Insmed is currently performing. Check out our latest analysis for Insmed
Was INSM’s weak performance lately a part of a long-term decline?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 technique enables me to assess various companies on a more comparable basis, using the latest information. For Insmed, its most recent earnings (trailing twelve month) is -$195.7M, which, in comparison to the previous year’s figure, has become more negative. Since these figures are somewhat nearsighted, I have determined an annualized five-year value for INSM’s earnings, which stands at -$89.8M. This doesn’t seem to paint a better picture, as earnings seem to have steadily been getting more and more negative over time.
We can further assess Insmed’s loss by looking at what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the past couple of years has been negative at -91.38%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Looking at growth from a sector-level, the US biotechnology industry has been growing its average earnings by double-digit 11.07% in the previous twelve months, and 20.18% over the past five. This suggests that any uplift the industry is benefiting from, Insmed has not been able to reap as much as its industry 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 useful step is to examine company-specific issues Insmed may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Insmed to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for INSM’s future growth? Take a look at our free research report of analyst consensus for INSM’s outlook.
2. Financial Health: Is INSM’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.
3. 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 September 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.
