In this article, I will take a look at Vermillion, Inc.'s (NASDAQ:VRML) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of VRML's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
How Well Did VRML Perform?
VRML is loss-making, with the most recent trailing twelve-month earnings of -US$13.5m (from 30 June 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$13.4m. Each year, for the past five years VRML has seen an annual increase in operating expense growth, outpacing revenue growth of 4.7%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Scanning growth from a sector-level, the US medical equipment industry has been growing its average earnings by double-digit 29% over the prior year,
Although Vermillion is loss-making, its has a good cash runway to meet its upcoming operating expense (should SG&A and one-year R&D remain constant at the current level of US$14m) over the next year. This is a strong indication of good cash management.
What does this mean?
Vermillion's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that incur net loss is always difficult to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues Vermillion may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Vermillion to get a more holistic view of the stock by looking at:
- Financial Health: Are VRML’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 June 2019. This may not be consistent with full year annual report figures.
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