Examining Phylogica Limited’s (ASX:PYC) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess PYC’s latest performance announced on 30 June 2017 and weight these figures against its longer term trend and industry movements. See our latest analysis for Phylogica
Did PYC beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to assess different stocks on a more comparable basis, using the latest information. For Phylogica, its latest earnings (trailing twelve month) is -AU$1.95M, which, in comparison to the previous year’s level, has become less negative. Since these figures are relatively nearsighted, I have created an annualized five-year figure for Phylogica’s earnings, which stands at -AU$3.39M. This means though net income is negative, it has become less negative over the years.
We can further examine Phylogica’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Phylogica has seen an annual decline in revenue of -6.23%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the Australian biotechs industry has been growing its average earnings by double-digit 19.00% in the previous twelve months, and 32.55% over the past five years. This means that, despite the fact that Phylogica is currently running a loss, it may have been aided by industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though Phylogica’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 envisage what will occur going forward, and when. The most insightful step is to examine company-specific issues Phylogica may be facing and whether management guidance has regularly been met in the past. You should continue to research Phylogica to get a better picture of the stock by looking at:
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1. Financial Health: Is PYC’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.
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2. 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 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.