For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Innovative Pharmaceutical Biotech Limited (SEHK:399) useful as an attempt to give more color around how Innovative Pharmaceutical Biotech is currently performing. See our latest analysis for Innovative Pharmaceutical Biotech
Did 399 perform worse than its track record and industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 technique allows me to analyze different companies on a more comparable basis, using the most relevant data points. For Innovative Pharmaceutical Biotech, its latest earnings is -HK$243.2M, which compared to the prior year’s level, has become more negative. Given that these figures are somewhat nearsighted, I have created an annualized five-year value for Innovative Pharmaceutical Biotech’s net income, which stands at -HK$231.7M. This doesn’t seem to paint a better picture, as earnings seem to have steadily been getting more and more negative over time.
Additionally, we can examine Innovative Pharmaceutical Biotech’s loss by researching what has been happening in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the past couple of years has been negative at -37.11%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Viewing growth from a sector-level, the HK biotechs industry has been growing its average earnings by double-digit 23.70% over the past year, and 10.77% over the past couple of years. This suggests that whatever uplift the industry is benefiting from, Innovative Pharmaceutical Biotech has not been able to realize the gains unlike its average peer.
What does this mean?
Though Innovative Pharmaceutical Biotech’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues Innovative Pharmaceutical Biotech may be facing and whether management guidance has consistently been met in the past. You should continue to research Innovative Pharmaceutical Biotech to get a more holistic view of the stock by looking at: