Should Wright Medical Group NV’s (NASDAQ:WMGI) Recent Earnings Worry You?
Assessing Wright Medical Group NV’s (NASDAQ:WMGI) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Wright Medical Group is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its medical equipment industry peers.
View our latest analysis for Wright Medical Group
How Well Did WMGI Perform?
WMGI is loss-making, with the most recent trailing twelve-month earnings of -US$120m (from 30 September 2018), which compared to last year has become more negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -US$153m. Each year, for the past five years WMGI has seen an annual increase in operating expense growth, outpacing revenue growth of 27%, 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 16% over the past twelve months, and 17% over the past half a decade. This growth is a median of profitable companies of 25 Medical Equipment companies in US including WNDM Medical, Heska and Becton Dickinson. This means whatever uplift the industry is enjoying, Wright Medical Group has not been able to gain as much as its industry peers.
Although Wright Medical Group is loss-making, it has a sufficient cash cushion (US$695m) to pay for its upcoming operating expenses over the next year. This is a sign of good cash management.
What does this mean?
Wright Medical Group’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 predict what will occur going forward, and when. The most valuable step is to assess company-specific issues Wright Medical Group may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Wright Medical Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for WMGI’s future growth? Take a look at our free research report of analyst consensus for WMGI’s outlook.
Financial Health: Are WMGI’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 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
