When AtriCure, Inc. (NASDAQ:ATRC) released its most recent earnings update (30 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well AtriCure has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see ATRC has performed.
Did ATRC perform better than its track record and industry?
ATRC is loss-making, with the most recent trailing twelve-month earnings of -US$20.4m (from 30 June 2019), which compared to last year has become more negative. However, the company's loss seem to be contracting over the medium term, with the five-year earnings average of -US$20.9m. Each year, for the past five years ATRC has seen an annual increase in operating expense growth, outpacing revenue growth of 16%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Viewing growth from a sector-level, the US medical equipment industry has been growing its average earnings by double-digit 29% in the previous twelve months,
Since AtriCure is loss-making, with operating expenses (opex) growing year-on-year at 14%, it may need to raise more cash over the next year. It currently has US$91m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$185m in the latest twelve months. Although this is a relatively simplistic calculation, and AtriCure may reduce its costs or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still helps us understand how sustainable the AtriCure’s operation is, and when things may have to change.
What does this mean?
AtriCure'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 AtriCure may be facing and whether management guidance has regularly been met in the past. You should continue to research AtriCure to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ATRC’s future growth? Take a look at our free research report of analyst consensus for ATRC’s outlook.
- Financial Health: Are ATRC’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.
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