Today I will examine Puma Biotechnology Inc’s (NASDAQ:PBYI) latest earnings update (31 March 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of PBYI’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. Check out our latest analysis for Puma Biotechnology
Were PBYI’s earnings stronger than its past performances and the industry?PBYI is loss-making, with the most recent trailing twelve-month earnings of -US$243.43m (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$160.48m. Each year, for the past five years PBYI has seen an annual increase in operating expense growth, outpacing revenue growth of 413.82%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Inspecting growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 21.75% in the prior year, and 17.77% over the previous five years. This shows that whatever uplift the industry is enjoying, Puma Biotechnology has not been able to realize the gains unlike its average peer.
Given that Puma Biotechnology is currently unprofitable, 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$78.55m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$324.83m in the latest twelve months. Although this is a relatively simplistic calculation, and Puma Biotechnology may reduce its costs or raise debt capital instead of coming to equity markets, the analysis still helps us understand how sustainable the Puma Biotechnology’s operation is, and when things may have to change.
What does this mean?
Puma Biotechnology’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues Puma Biotechnology may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Puma Biotechnology to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PBYI’s future growth? Take a look at our free research report of analyst consensus for PBYI’s outlook.
- Financial Health: Is PBYI’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.