After reading AtriCure, Inc.'s (NasdaqGM:ATRC) most recent earnings announcement (30 September 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether AtriCure's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
See our latest analysis for AtriCure
Was ATRC's recent earnings decline worse than the long-term trend and the industry?
ATRC is loss-making, with the most recent trailing twelve-month earnings of -US$22.5m (from 30 September 2019), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -US$21.4m. Each year, for the past five years ATRC has seen an annual increase in operating expense growth, outpacing revenue growth of 15%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Looking at growth from a sector-level, the US medical equipment industry has been growing its average earnings by double-digit 28% in the prior year, and 15% over the previous five years. This growth is a median of profitable companies of 25 Medical Equipment companies in US including Kewaunee Scientific, Repro Med Systems and Lantheus Holdings. This means any tailwind the industry is deriving benefit from, AtriCure has not been able to leverage it as much as its industry peers.
Since AtriCure is loss-making, with operating expenses (opex) growing year-on-year at 14%, it may need to raise more cash over the next year. It currently has US$80m in cash and short-term investments, however, opex (SG&A and one-year R&D) reachedUS$192m in the latest twelve months. Although this is a relatively simplistic calculation, and AtriCure may reduce its costs or raise debt capital instead of coming to equity markets, the analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
Though AtriCure's past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most valuable step is to examine company-specific issues AtriCure may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research AtriCure to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ATRC’s future growth? Take a look at our free research report of analyst consensus for ATRC’s outlook.
- Financial Health: Are ATRC’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 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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