Faron Pharmaceuticals Oy (LON:FARN): Does The -72.28% Earnings Drop Reflect A Longer Term Trend?

Examining Faron Pharmaceuticals Oy’s (AIM:FARN) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess FARN’s latest performance announced on 30 June 2017 and compare these figures to its longer term trend and industry movements. Check out our latest analysis for Faron Pharmaceuticals Oy

How Did FARN’s Recent Performance Stack Up Against Its Past?

I use data from the most recent 12 months, 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 method enables me to examine different stocks in a uniform manner using new information. For Faron Pharmaceuticals Oy, its most recent bottom-line (trailing twelve month) is -€12.82M, which, in comparison to last year’s level, has become more negative. Since these figures may be fairly short-term, I’ve calculated an annualized five-year value for Faron Pharmaceuticals Oy’s earnings, which stands at -€5.98M. This doesn’t seem to paint a better picture, since earnings seem to have steadily been getting more and more negative over time.

AIM:FARN Income Statement Mar 19th 18
AIM:FARN Income Statement Mar 19th 18
We can further assess Faron Pharmaceuticals Oy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Faron Pharmaceuticals Oy’s top-line has increased by 11.64% on average, signalling that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Looking at growth from a sector-level, the UK biotechs industry has been growing its average earnings by double-digit 40.80% over the past twelve months, and 14.62% over the past five years. This means any uplift the industry is deriving benefit from, Faron Pharmaceuticals Oy has not been able to leverage it as much as its industry peers.

What does this mean?

Though Faron Pharmaceuticals Oy’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most useful step is to assess company-specific issues Faron Pharmaceuticals Oy may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Faron Pharmaceuticals Oy to get a better picture of the stock by looking at:

  • 1. Future Outlook: What are well-informed industry analysts predicting for FARN’s future growth? Take a look at our free research report of analyst consensus for FARN’s outlook.
  • 2. Financial Health: Is FARN’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 June 2017. This may not be consistent with full year annual report figures.