Biomerica, Inc. :BMRA-US: Earnings Analysis: Q2, 2017 By the Numbers : January 18, 2017

Biomerica, Inc. reports financial results for the quarter ended November 30, 2016.

Highlights

  • Summary numbers: Revenues of USD 1.43 million, Net Earnings of USD -0.20 million.
  • Gross margins widened from 35.37% to 38.87% compared to the same period last year, operating (EBITDA) margins now -11.28% from -13.07%.
  • Change in operating cash flow of -2.86% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from -16.80% to -14.17%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-11-30 2016-08-31 2016-05-31 2016-02-29 2015-11-30
Relevant Numbers (Quarterly)
Revenues (mil) 1.43 1.41 1.33 1.36 1.17
Revenue Growth (%YOY) 22.93 9.57 -11.29 4.79 2.78
Earnings (mil) -0.2 -0.06 -1.23 -0.14 -0.07
Earnings Growth (%YOY) -203.87 23.39 -604.24 -15.2 71.95
Net Margin (%) -14.17 -3.93 -92.43 -9.91 -5.73
EPS -0.02 -0.01 -0.16 -0.02 -0.01
Return on Equity (%) -15.94 -4.27 -92.42 -9.94 -4.85
Return on Assets (%) -14.5 -3.91 -84.51 -9.14 -4.44

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, BMRA-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if BMRA-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 1.57% and earnings by -266.11% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 35.37% to 38.87%, while operating margins improved from -13.07% to -11.28% over this period. For comparison, gross margins were 40.92% and EBITDA margins -0.90% in the immediate last period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

BMRA-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 270.97 days from 297.36 days for the same period last year.

Cash Versus Earnings – Sustainable Performance?

BMRA-US‘s year-on-year change in operating cash flow of -2.86% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from -18.01% to -15.33% and pretax margins widened from -16.80% to -14.17%.

EBIT Margin History
PreTax Margin History

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Company Profile

Biomerica, Inc. is a global biomedical company, which develops, manufactures, and markets medical diagnostic products designed for the early detection and monitoring of chronic diseases and medical conditions. The company’s medical diagnostic products are sold worldwide in two markets: clinical laboratories and point of care. Its diagnostic test kits are used to analyze blood, urine, or fecal specimens from patients in the diagnosis of various diseases and other medical complications, and to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations. Biomerica was founded in September 1971 and is headquartered in Irvine, CA.

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