Oasmia Pharmaceutical AB :OASM-US: Earnings Analysis: Q4, 2017 By the Numbers : July 12, 2017

Oasmia Pharmaceutical AB reports financial results for the quarter ended April 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 0.00 million, Net Earnings of USD -4.71 million.
  • Gross margins narrowed from -51,783.05% to -85,334.09% compared to the same period last year, operating (EBITDA) margins now -82,834.09% from -49,876.27%.
  • Change in operating cash flow of 34.72% 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:

2017-04-30 2017-01-31 2016-10-31 2016-07-31 2016-04-30
Relevant Numbers (Quarterly)
Revenues (mil) 0 0 0.01 0 0.01
Revenue Growth (%YOY) -31.25 -99.43 4.44 -83.53 67.97
Earnings (mil) -4.71 -4.43 -4.74 -4.37 -4.01
Earnings Growth (%YOY) -17.62 -49.74 7.6 7.08 -14.11
Net Margin (%) -95640.91 -110825 -73826.79 -102558.33 -55901.69
EPS -0.12 -0.11 -0.13 -0.12 -0.11
Return on Equity (%) -13.74 -12.98 -14.07 -11.71 -9.94
Return on Assets (%) -31.79 -29.95 -31.86 -27.99 -25.8

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, OASM-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 OASM-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 23.39% and earnings by -6.48% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from -51,783.05% to -85,334.09%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from -49,876.27% to -82,834.09% in this time frame. For comparison, gross margins were -96,511.11% and EBITDA margins were -93,683.33% in the previous 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

OASM-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to -355,568.15 days from -166,627.84 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Cash Versus Earnings – Sustainable Performance?

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

OASM-US‘s year-on-year change in operating cash flow of 34.72% 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 -51,783.05% to -85,329.55% and (2) one-time items that contributed to a decrease in pretax margins from -55,901.69% to -95,640.91%

EBIT Margin History
PreTax Margin History

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Company Profile

Oasmia Pharmaceutical AB is engaged in reaserch and development of drugs. It formulates pharmaceutical products for ovarian and breast cancer for humans and cancer for animals. Its portfolio includes Paclical, Doxophos, Docecal, and OAS-19 for human health; and Paccal Vet and Doxophos Vet for animal health. The company was founded by Julian Aleksov and Bo Cederstrand on April 15, 1988 and is headquartered in Uppsala, Sweden.

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