After reading T2 Biosystems Inc’s (NASDAQ:TTOO) latest earnings update (30 June 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether TTOO has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Check out our latest analysis for T2 Biosystems
Did TTOO’s recent performance beat its trend and industry?
TTOO is loss-making, with the most recent trailing twelve-month earnings of -US$57.50m (from 30 June 2018), which compared to last year has become more negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -US$45.26m. Each year, for the past five years TTOO has seen an annual increase in operating expense growth, outpacing revenue growth of 53.11%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Looking at growth from a sector-level, the US biotechs industry has been growing its average earnings by double-digit 29.73% over the prior year, and 17.97% over the past five years. This growth is a median of profitable companies of 25 Biotechs companies in US including Enzon Pharmaceuticals, Gilead Sciences and Amgen. This shows that whatever uplift the industry is benefiting from, T2 Biosystems has not been able to gain as much as its industry peers.
Although T2 Biosystems is loss-making, its has a good cash runway to meet its upcoming operating expense (should SG&A and one-year R&D remain constant at the current level of US$24.49m) over the next year. This is a sign of good cash management.
What does this mean?
T2 Biosystems’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 difficult to forecast what will occur going forward, and when. The most useful step is to examine company-specific issues T2 Biosystems may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research T2 Biosystems to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TTOO’s future growth? Take a look at our free research report of analyst consensus for TTOO’s outlook.
- Financial Health: Are TTOO’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.