After looking at KalVista Pharmaceuticals Inc’s (NASDAQ:KALV) latest earnings update (31 July 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for KalVista Pharmaceuticals
How Did KALV’s Recent Performance Stack Up Against Its Past?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to examine different companies on a similar basis, using the latest information. KalVista Pharmaceuticals’s latest earnings -$21.2M, which, against the previous year’s figure, has become more negative. Given that these figures are fairly short-term thinking, I’ve determined an annualized five-year value for KalVista Pharmaceuticals’s net income, which stands at -$17.9M. This doesn’t look much better, as earnings seem to have steadily been getting more and more negative over time.We can further assess KalVista Pharmaceuticals’s loss by researching what has been happening in the industry on top of within the company. Initially, I want to briefly look into the line items. Revenue growth over past couple of years has been negative at -25.00%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Scanning growth from a sector-level, the US biotechnology industry has been growing its average earnings by double-digit 12.32% over the prior twelve months, and 19.91% over the past five. This means that any uplift the industry is profiting from, KalVista Pharmaceuticals has not been able to realize the gains unlike its average peer.
What does this mean?
KalVista Pharmaceuticals’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues KalVista Pharmaceuticals may be facing and whether management guidance has consistently been met in the past. You should continue to research KalVista Pharmaceuticals to get a more holistic view of the stock by looking at:
1. Financial Health: Is KALV’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.
2. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.