After looking at Intercept Pharmaceuticals Inc’s (NASDAQ:ICPT) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Intercept Pharmaceuticals
Were ICPT’s earnings stronger than its past performances and the industry?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess different stocks in a uniform manner using the latest information. Intercept Pharmaceuticals’s latest twelve-month earnings -$369.1M, which, relative to the previous year’s figure, has become less negative. Given that these values may be fairly nearsighted, I’ve determined an annualized five-year figure for Intercept Pharmaceuticals’s net income, which stands at -$188.8M. This suggests that, Intercept Pharmaceuticals has historically performed better than recently, though it seems like earnings are now heading back in the right direction again.
We can further evaluate Intercept Pharmaceuticals’s loss by researching what has been happening in the industry on top of within the company. First, I want to quickly look into the line items. Revenue growth over past couple of years has increased by 71.96%, signalling that Intercept Pharmaceuticals is in a high-growth period with expenses racing ahead elevated top-line growth rates. Scanning growth from a sector-level, the US biotechnology industry has been growing its average earnings by double-digit 11.07% over the past year, and 20.18% over the past five. This suggests that any uplift the industry is deriving benefit from, Intercept Pharmaceuticals has not been able to realize the gains unlike its average peer.
What does this mean?
Intercept Pharmaceuticals’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will happen in the future and when. The most useful step is to examine company-specific issues Intercept Pharmaceuticals may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Intercept Pharmaceuticals to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for ICPT’s future growth? Take a look at our free research report of analyst consensus for ICPT’s outlook.
2. Financial Health: Is ICPT’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.
3. 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.