When TransEnterix, Inc. (AMEX:TRXC) announced its most recent earnings (30 September 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how TransEnterix 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 TRXC has performed.
How Did TRXC's Recent Performance Stack Up Against Its Past?
TRXC is loss-making, with the most recent trailing twelve-month earnings of -US$146.9m (from 30 September 2019), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -US$71.5m. Each year, for the past five years TRXC has seen an annual increase in operating expense growth, outpacing revenue growth of 56%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Looking at growth from a sector-level, the US medical equipment industry has been growing its average earnings by double-digit 25% in the prior twelve months, and 15% over the past five years. This growth is a median of profitable companies of 25 Medical Equipment companies in US including Kewaunee Scientific, Repro Med Systems and Lantheus Holdings. This shows that any tailwind the industry is benefiting from, TransEnterix has not been able to reap as much as its industry peers.
Given that TransEnterix is currently unprofitable, with operating expenses (opex) growing year-on-year at 14%, it may need to raise more cash over the next year. It currently has US$22m in cash and short-term investments, however, opex (SG&A and one-year R&D) reachedUS$73m in the latest twelve months. Although this is a relatively simplistic calculation, and TransEnterix may reduce its costs or open a new line of credit instead of issuing new equity shares, the analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
Though TransEnterix'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 occur going forward, and when. The most useful step is to assess company-specific issues TransEnterix may be facing and whether management guidance has steadily been met in the past. You should continue to research TransEnterix to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TRXC’s future growth? Take a look at our free research report of analyst consensus for TRXC’s outlook.
Financial Health: Are TRXC’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 30 September 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.