When Avid Bioservices Inc (NASDAQ:CDMO) released its most recent earnings update (31 October 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Avid Bioservices 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 CDMO has performed. See our latest analysis for Avid Bioservices
Commentary On CDMO’s Past Performance
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 blend enables me to analyze different companies in a uniform manner using new information. For Avid Bioservices, its latest trailing-twelve-month earnings is -US$31.56M, which compared to last year’s level, has become less negative. Given that these figures are relatively short-term, I’ve calculated an annualized five-year figure for Avid Bioservices’s net income, which stands at -US$41.51M. This suggests that, even though net income is negative, it has become less negative over the years.
We can further evaluate Avid Bioservices’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Avid Bioservices’s top-line has risen by 26.40% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Scanning growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 13.11% over the prior twelve months, and 19.44% over the previous five years. This means that, even though Avid Bioservices is currently unprofitable, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Avid Bioservices’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 hard to forecast what will occur going forward, and when. The most useful step is to assess company-specific issues Avid Bioservices may be facing and whether management guidance has dependably been met in the past. You should continue to research Avid Bioservices to get a better picture of the stock by looking at:
- 1. Financial Health: Is CDMO’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 31 October 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.