Should You Be Concerned About Silence Therapeutics plc’s (AIM:SLN) -27.5% Earnings Decline?
For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Silence Therapeutics plc’s (AIM:SLN) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. View our latest analysis for Silence Therapeutics
Did SLN perform worse than its track record and industry?
I look at the ‘latest twelve-month’ data, 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 enables me to examine different companies on a similar basis, using the latest information. Silence Therapeutics’s latest earnings -£9.2M, which, relative to the previous year’s figure, has become more negative. Given that these values are relatively short-term thinking, I have calculated an annualized five-year figure for Silence Therapeutics’s net income, which stands at -£10.8M. This suggests that, even though net income is negative, it has become less negative over the years.
We can further assess Silence Therapeutics’s loss by looking at what’s going on in the industry along with within the company. First, I want to quickly look into the line items. Revenue growth over last couple of years has been negative at -31.97%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the UK biotechnology industry has been growing its average earnings by double-digit 25.81% in the past year, and a more muted 7.44% over the previous five years. This means that any uplift the industry is deriving benefit from, Silence Therapeutics has not been able to reap as much as its average peer.
What does this mean?
Though Silence Therapeutics’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to envisage what will happen in the future and when. The most valuable step is to assess company-specific issues Silence Therapeutics may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Silence Therapeutics to get a better picture of the stock by looking at:
1. Financial Health: Is SLN’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.
2. 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.
