Understanding how Collagen Solutions plc (AIM:COS) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Collagen Solutions is doing by comparing its latest earnings with its long-term trend as well as the performance of its biotechs industry peers. See our latest analysis for Collagen Solutions
Despite a decline, did COS underperform the long-term trend and the industry?
I 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 blend allows me to examine different companies in a uniform manner using new information. For Collagen Solutions, its most recent bottom-line (trailing twelve month) is -£2.0M, which, in comparison to the prior year’s figure, has become more negative. Given that these values may be relatively short-term thinking, I’ve created an annualized five-year value for COS’s net income, which stands at -£1.6M. This doesn’t look much better, as earnings seem to have steadily been getting more and more negative over time.We can further evaluate Collagen Solutions’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the past couple of years has increased by 53.70%, indicating that Collagen Solutions is in a high-growth period with expenses racing ahead high top-line growth rates, leading to yearly losses. Viewing growth from a sector-level, the UK biotechs industry has been growing its average earnings by double-digit 13.87% over the past twelve months, and 19.14% over the past five years. This means any uplift the industry is profiting from, Collagen Solutions has not been able to reap as much as its industry peers.
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 forecast what will occur going forward, and when. The most insightful step is to examine company-specific issues Collagen Solutions may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Collagen Solutions to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for COS’s future growth? Take a look at our free research report of analyst consensus for COS’s outlook.
2. Financial Health: Is COS’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 30 September 2017. This may not be consistent with full year annual report figures.