Fate Therapeutics Inc (NASDAQ:FATE): Does -16.46% Earnings Drop In A Year Reflect The Long-Term Trend?

In this commentary, I will examine Fate Therapeutics Inc’s (NASDAQ:FATE) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the biotechs industry performed. As an investor, I find it beneficial to assess FATE’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Fate Therapeutics

Did FATE perform worse than its track record and industry?

To account for any quarterly or half-yearly updates, 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 technique allows me to assess different stocks on a more comparable basis, using the latest information. For Fate Therapeutics, its most recent bottom-line (trailing twelve month) is -$38.4M, which, in comparison to the previous year’s figure, has become more negative. Given that these figures may be relatively nearsighted, I’ve estimated an annualized five-year figure for FATE’s net income, which stands at -$26.3M. This doesn’t look much better, as earnings seem to have gradually been getting more and more negative over time.

NasdaqGM:FATE Income Statement Jan 22nd 18
NasdaqGM:FATE Income Statement Jan 22nd 18
Additionally, we can assess Fate Therapeutics’s loss by looking at what’s going on in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the last couple of years has increased by 25.87%, indicating that Fate Therapeutics is in a high-growth phase with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Inspecting growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 12.33% over the past twelve months, and 19.86% over the previous five years. This suggests that any tailwind the industry is profiting from, Fate Therapeutics has not been able to gain 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 envisage what will occur going forward, and when. The most insightful step is to examine company-specific issues Fate Therapeutics may be facing and whether management guidance has consistently been met in the past. You should continue to research Fate Therapeutics to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for FATE’s future growth? Take a look at our free research report of analyst consensus for FATE’s outlook.

2. Financial Health: Is FATE’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.