Merus NV. (NASDAQ:MRUS): Does The -54.76% Earnings Drop Reflect A Longer Term Trend?

After reading Merus NV.’s (NASDAQ:MRUS) most recent earnings announcement (31 December 2017), 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 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 a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for Merus

How Well Did MRUS Perform?

For the purpose of this commentary, I like to 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 blend enables me to examine different stocks on a similar basis, using the most relevant data points. For Merus, its latest earnings (trailing twelve month) is -€73.09M, which, relative to the previous year’s figure, has become more negative. Given that these figures are fairly nearsighted, I have determined an annualized five-year value for Merus’s earnings, which stands at -€38.24M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.

NasdaqGM:MRUS Income Statement May 19th 18
NasdaqGM:MRUS Income Statement May 19th 18
We can further examine Merus’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Merus’s top-line has increased by 64.91% on average, indicating that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Eyeballing growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 21.75% over the past twelve months, and 18.58% over the last five years. This means that any uplift the industry is benefiting from, Merus has not been able to leverage it as much as its average peer.

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 predict what will occur going forward, and when. The most insightful step is to examine company-specific issues Merus may be facing and whether management guidance has dependably been met in the past. You should continue to research Merus to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for MRUS’s future growth? Take a look at our free research report of analyst consensus for MRUS’s outlook.
  2. Financial Health: Is MRUS’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 December 2017. This may not be consistent with full year annual report figures.