After reading MediciNova Inc’s (NASDAQ:MNOV) most recent earnings announcement (30 September 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. Check out our latest analysis for MediciNova
Did MNOV beat its long-term earnings growth trend and its industry?
I prefer to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend allows me to examine many different companies in a uniform manner using new information. For MediciNova, its most recent twelve-month earnings is -$11.0M, which, against the previous year’s figure, has become less negative. Since these figures are somewhat short-term, I’ve estimated an annualized five-year figure for MediciNova’s earnings, which stands at -$11.3M. This shows that, though net income is negative, it has become less negative over the years.
We can further analyze MediciNova’s loss by researching what has been happening in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the past few years has more than doubled, signalling that MediciNova is in a high-growth phase with expenses racing ahead high top-line growth rates, leading to yearly losses. Inspecting growth from a sector-level, the US biotechnology industry has been growing its average earnings by double-digit 11.07% in the previous twelve months, and 20.18% over the past five years. This means any uplift the industry is benefiting from, MediciNova has not been able to gain as much as its industry peers.
What does this mean?
Though MediciNova’s past data is helpful, it is only one aspect of my investment thesis. 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 MediciNova may be facing and whether management guidance has dependably been met in the past. I suggest you 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.