Biomerica, Inc. :BMRA-US: Earnings Analysis: Q3, 2017 By the Numbers : April 18, 2017

Biomerica, Inc. reports financial results for the quarter ended February 28, 2017.

Highlights

  • Summary numbers: Revenues of USD 1.50 million, Net Earnings of USD -0.30 million.
  • Gross margins widened from 25.30% to 29.96% compared to the same period last year, operating (EBITDA) margins now -17.68% from -15.49%.
  • Change in operating cash flow of -135.43% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2017-02-28 2016-11-30 2016-08-31 2016-05-31 2016-02-29
Relevant Numbers (Quarterly)
Revenues (mil) 1.5 1.43 1.41 1.33 1.36
Revenue Growth (%YOY) 10.16 22.93 9.57 -11.29 4.79
Earnings (mil) -0.3 -0.2 -0.06 -1.23 -0.14
Earnings Growth (%YOY) -125.29 -203.87 23.39 -604.24 -15.2
Net Margin (%) -20.28 -14.17 -3.93 -92.43 -9.91
EPS -0.04 -0.02 -0.01 -0.16 -0.02
Return on Equity (%) -24.73 -15.94 -4.27 -92.42 -9.94
Return on Assets (%) -22 -14.5 -3.91 -84.51 -9.14

Access our Ratings and Scores for Biomerica, Inc.

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 4.73% and earnings by -49.91% compared to the previous period.

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from -15.49% to -17.68%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 25.30% to 29.96%. For comparison, gross margins were 38.87% and EBITDA margins -11.28% 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 gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 248.52, compared to last year’s level of 240.05 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BMRA-US‘s year-on-year change in operating cash flow of -135.43% 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 decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -19.76% to -21.18% and (2) one-time items that contributed to a decrease in pretax margins from -19.10% to -20.28%

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Biomerica, Inc.

Company Profile

Biomerica, Inc. is a biomedical company, which develops, designs, manufactures, and markets medical diagnostic products designed for the early detection and monitoring of chronic diseases and medical conditions. The firm focuses on products for gastrointestinal, food intolerances, diabetes, and esoteric tests. Its medical diagnostic products are sold worldwide in clinical laboratories and point of care markets. The company was founded in September 1971 and is headquartered in Irvine, CA.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of BMRA-US.