Should MediciNova Inc’s (NASDAQ:MNOV) Recent Earnings Decline Worry You?

Analyzing MediciNova Inc’s (NASDAQ:MNOV) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess MNOV’s recent performance announced on 31 March 2018 and compare these figures to its long-term trend and industry movements. See our latest analysis for MediciNova

Commentary On MNOV’s Past Performance

MNOV is loss-making, with the most recent trailing twelve-month earnings of -US$12.69m (from 31 March 2018), which compared to last year has become more negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -US$10.67m. Each year, for the past five years MNOV has seen an annual increase in operating expense growth, outpacing revenue growth of 111.48%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Eyeballing growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 21.75% over the prior twelve months, and 17.77% over the past five. This suggests that any uplift the industry is profiting from, MediciNova has not been able to reap as much as its industry peers.
NasdaqGM:MNOV Income Statement June 14th 18
NasdaqGM:MNOV Income Statement June 14th 18

Although MediciNova is loss-making, its has a long cash runway to meet its upcoming operating expenses should this remain constant at the current level of US$14.67m (SG&A and one-year R&D) . This is a strong indication of good cash management.

What does this mean?

Though MediciNova’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to forecast what will occur going forward, and when. The most valuable step is to examine company-specific issues MediciNova may be facing and whether management guidance has consistently been met in the past. You should continue to research MediciNova to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for MNOV’s future growth? Take a look at our free research report of analyst consensus for MNOV’s outlook.
  2. Financial Health: Is MNOV’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 31 March 2018. This may not be consistent with full year annual report figures.