After looking at Sterling Biotech Limited’s (NSEI:STERLINBIO) latest earnings announcement (30 June 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Sterling Biotech’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Sterling Biotech
How Well Did STERLINBIO Perform?
I look at the ‘latest twelve-month’ data, 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 method allows me to analyze different stocks on a more comparable basis, using the most relevant data points. Sterling Biotech’s latest twelve-month earnings -₹4,344.2M, which compared to the prior year’s figure, has become more negative. Since these figures may be fairly nearsighted, I have calculated an annualized five-year figure for Sterling Biotech’s net income, which stands at -₹2,856.7M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.
We can further analyze Sterling Biotech’s loss by researching what’s going on in the industry along with within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has been negative at -26.13%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Looking at growth from a sector-level, the IN pharmaceuticals industry has been growing its average earnings by double-digit 11.44% over the prior twelve months, and 14.21% over the previous five years. This suggests that whatever tailwind the industry is enjoying, Sterling Biotech has not been able to gain 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 hard to predict what will occur going forward, and when. The most insightful step is to examine company-specific issues Sterling Biotech may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Sterling Biotech to get a better picture of the stock by looking at:
1. Financial Health: Is STERLINBIO’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.