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Was Innate Immunotherapeutics Limited’s (ASX:IIL) Earnings Growth Better Than The Industry’s?

In this commentary, I will examine Innate Immunotherapeutics Limited’s (ASX:IIL) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the biotechs industry performed. As an investor, I find it beneficial to assess IIL’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Innate Immunotherapeutics

Did IIL’s recent earnings growth beat the long-term trend and the industry?

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 blend enables me to examine various companies in a uniform manner using the most relevant data points. For Innate Immunotherapeutics, its most recent earnings (trailing twelve month) is -AU$6.09M, which compared to the prior year’s figure, has become less negative. Given that these figures are somewhat short-term thinking, I have estimated an annualized five-year figure for Innate Immunotherapeutics’s earnings, which stands at -AU$5.36M. This means that, Innate Immunotherapeutics has historically performed better than recently, while it seems like earnings are now heading back in the right direction again.

ASX:IIL Income Statement Mar 31st 18
ASX:IIL Income Statement Mar 31st 18

We can further evaluate Innate Immunotherapeutics’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Innate Immunotherapeutics’s top-line has increased by 23.45% on average, signalling that the company is in a high-growth period with expenses shooting ahead of revenues, leading to annual losses. Looking at growth from a sector-level, the Australian biotechs industry has been growing, albeit, at a subdued single-digit rate of 5.50% in the previous twelve months, and a substantial 22.76% over the previous five years. This suggests that whatever uplift the industry is deriving benefit from, Innate Immunotherapeutics has not been able to leverage it as much as its industry peers.

What does this mean?

Though Innate Immunotherapeutics’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 insightful step is to assess company-specific issues Innate Immunotherapeutics may be facing and whether management guidance has regularly been met in the past. You should continue to research Innate Immunotherapeutics to get a more holistic view of the stock by looking at:

  • 1. Financial Health: Is IIL’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 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.

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