When Compugen Ltd (NASDAQ:CGEN) released its most recent earnings update (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Compugen’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not CGEN actually performed well. Below is a quick commentary on how I see CGEN has performed. Check out our latest analysis for Compugen
Was CGEN’s recent earnings decline indicative of a tough track record?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 analyze different companies on a similar basis, using new information. For Compugen, its most recent trailing-twelve-month earnings is -US$37.07M, which compared to last year’s level, has become more negative. Since these values are relatively nearsighted, I’ve determined an annualized five-year value for Compugen’s earnings, which stands at -US$18.70M. 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 analyze Compugen’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Compugen’s top-line has grown by 16.28% 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 US life sciences industry has been growing its average earnings by double-digit 13.10% in the previous twelve months, and 19.23% over the past five years. This shows that whatever tailwind the industry is deriving benefit from, Compugen has not been able to gain as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to predict what will happen in the future and when. The most useful step is to examine company-specific issues Compugen may be facing and whether management guidance has consistently been met in the past. You should continue to research Compugen to get a better picture of the stock by looking at:
- 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.
- 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.
- 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 31 December 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.