For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Egalet Corporation (NASDAQ:EGLT) useful as an attempt to give more color around how Egalet is currently performing. View out our latest analysis for Egalet
Commentary On EGLT’s Past PerformanceEGLT is loss-making, with the most recent trailing twelve-month earnings of -US$56.34m (from 31 March 2018), which compared to last year has become less negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -US$49.68m. Each year, for the past five years EGLT has seen an annual increase in operating expense growth, outpacing revenue growth of 48.64%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Scanning growth from a sector-level, the US pharmaceuticals industry has been growing its average earnings by double-digit 11.92% in the past year, and a more subdued 9.52% over the past half a decade. This shows that, while Egalet is currently unprofitable, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
Given that Egalet is loss-making, with operating expenses (opex) growing year-on-year at 25.00%, it may need to raise more cash over the next year. It currently has US$74.47m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$76.40m in the latest twelve months. Although this is a relatively simplistic calculation, and Egalet 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 Egalet’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 examine company-specific issues Egalet may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Egalet to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EGLT’s future growth? Take a look at our free research report of analyst consensus for EGLT’s outlook.
- Financial Health: Is EGLT’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.