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 Biofrontera AG (XTRA:B8F) useful as an attempt to give more color around how Biofrontera is currently performing. Check out our latest analysis for Biofrontera
Was B8F’s recent earnings decline worse than the long-term trend and the 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 assess different companies on a similar basis, using the most relevant data points. For Biofrontera, its latest earnings (trailing twelve month) is -€18.03M, which, in comparison to the previous year’s figure, has become more negative. Given that these values are somewhat short-term thinking, I have determined an annualized five-year figure for B8F’s earnings, which stands at -€8.86M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been getting more and more negative over time.
We can further assess Biofrontera’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Biofrontera’s top-line has increased by 29.10% on average, signalling that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Eyeballing growth from a sector-level, the DE biotechs industry has been growing its average earnings by double-digit 21.32% over the previous year, and 17.82% over the past five years. This shows that whatever uplift the industry is deriving benefit from, Biofrontera has not been able to reap as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues Biofrontera may be facing and whether management guidance has dependably been met in the past. You should continue to research Biofrontera to get a more holistic view of the stock by looking at:
- Financial Health: Is B8F’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.
- Valuation: What is B8F 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 B8F is currently mispriced by the market.
- 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.