Was Zymeworks Inc’s (TSE:ZYME) Earnings Growth Better Than The Industry’s?
When Zymeworks Inc’s (TSX:ZYME) announced its latest earnings (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Zymeworks’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not ZYME actually performed well. Below is a quick commentary on how I see ZYME has performed. See our latest analysis for Zymeworks
How Well Did ZYME Perform?
For the purpose of this commentary, I like to use 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 technique enables me to analyze different companies on a more comparable basis, using the most relevant data points. For Zymeworks, its most recent trailing-twelve-month earnings is -US$10.93M, which compared to the prior year’s figure, has become less negative. Since these values are fairly short-term thinking, I’ve computed an annualized five-year figure for Zymeworks’s earnings, which stands at -US$32.54M. This suggests that, even though net income is negative, it has become less negative over the years.
We can further assess Zymeworks’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Zymeworks’s top-line has increased by 60.73% on average, signalling that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Viewing growth from a sector-level, the Canadian biotechs industry has been multiplying growth, more than doubling average earnings over the previous year, and a solid 13.36% over the previous five years. This means that any tailwind the industry is deriving benefit from, Zymeworks has not been able to realize the gains unlike its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to predict what will occur going forward, and when. The most useful step is to examine company-specific issues Zymeworks may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Zymeworks to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for ZYME’s future growth? Take a look at our free research report of analyst consensus for ZYME’s outlook.
2. Financial Health: Is ZYME’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 trailing twelve months from 31 December 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.
