Was Conatus Pharmaceuticals Inc’s (NASDAQ:CNAT) Earnings Growth Better Than The Industry’s?
When Conatus Pharmaceuticals Inc (NASDAQ:CNAT) released its most recent earnings update (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Conatus Pharmaceuticals performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see CNAT has performed. View our latest analysis for Conatus Pharmaceuticals
How CNAT fared against its long-term earnings performance and its industry
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 blend enables me to assess various companies on a more comparable basis, using the most relevant data points. For Conatus Pharmaceuticals, its most recent trailing-twelve-month earnings is -$22.2M, which compared to the previous year’s level, has become less negative. Given that these values are relatively short-term thinking, I’ve calculated an annualized five-year value for CNAT’s net income, which stands at -$18.3M. This shows that, Conatus Pharmaceuticals has historically performed better than recently, although it seems like earnings are now heading back in the right direction again.
We can further examine Conatus Pharmaceuticals’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Conatus Pharmaceuticals’s top-line more than doubled on average, indicating that the business is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Viewing growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 12.33% over the past year, and 19.86% over the past half a decade. This suggests that, though Conatus Pharmaceuticals is currently unprofitable, it may have gained from industry tailwinds, moving earnings in the right direction.
What does this mean?
Though Conatus Pharmaceuticals’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues Conatus Pharmaceuticals may be facing and whether management guidance has consistently been met in the past. You should continue to research Conatus Pharmaceuticals to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CNAT’s future growth? Take a look at our free research report of analyst consensus for CNAT’s outlook.
2. Financial Health: Is CNAT’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.
