For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Neuren Pharmaceuticals Limited’s (ASX:NEU) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. Check out our latest analysis for Neuren Pharmaceuticals
How NEU fared against its long-term earnings performance and its industry
I prefer to 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 blend allows me to analyze different companies on a more comparable basis, using new information. For Neuren Pharmaceuticals, its latest twelve-month earnings is -A$8.2M, which compared to the prior year’s level, has become less negative. Given that these values may be relatively short-term, I’ve estimated an annualized five-year figure for NEU’s net income, which stands at -A$8.6M. This shows that, even though net income is negative, it has become less negative over the years.
We can further evaluate Neuren Pharmaceuticals’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last few years has been negative at -18.22%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Viewing growth from a sector-level, the Australian pharmaceuticals industry has been growing its average earnings by double-digit 10.76% over the prior twelve months, and 10.67% over the past five years. This means while Neuren Pharmaceuticals is currently unprofitable, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though Neuren Pharmaceuticals’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most useful step is to assess company-specific issues Neuren Pharmaceuticals may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Neuren Pharmaceuticals to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for NEU’s future growth? Take a look at our free research report of analyst consensus for NEU’s outlook.