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How Compugen Ltd’s (CGEN) EPS Dropped -53.2%, Did Its Industry Show Weakness Too?

Phillip Young

After looking at Compugen Ltd’s (NASDAQ:CGEN) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Compugen’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for CGEN

Was CGEN’s weak performance lately a part of a long-term decline?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, 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 allows me to analyze many different companies in a uniform manner using the latest information. Compugen’s most recent earnings -$36.2M, which, against the prior year’s figure, has become more negative. Given that these figures may be relatively short-term, I’ve estimated an annualized five-year figure for CGEN’s earnings, which stands at -$17.2M. This doesn’t seem to paint a better picture, as earnings seem to have steadily been getting more and more negative over time.

NasdaqGM:CGEN Income Statement Dec 2nd 17

We can further assess Compugen’s loss by looking at what’s going on in the industry along with within the company. Firstly, I want to briefly look into the line items. Revenue growth over last couple of years has grew by 18.46%, signalling that Compugen is in a high-growth phase with expenses racing ahead high top-line growth rates. Viewing growth from a sector-level, the US life sciences tools and services industry has been growing its average earnings by double-digit 10.54% over the previous twelve months, and 16.45% over the previous few years. This shows that whatever tailwind the industry is enjoying, Compugen has not been able to gain as much as its average peer.

What does this mean?

Compugen’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues Compugen may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Compugen to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for CGEN’s future growth? Take a look at our free research report of analyst consensus for CGEN’s outlook.

2. Financial Health: Is CGEN’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.