United-Guardian, Inc. :UG-US: Earnings Analysis: Q3, 2016 By the Numbers : November 10, 2016

United-Guardian, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of United-Guardian, Inc. – Johnson & Johnson, International Flavors & Fragrances Inc., Pfizer Inc., C. R. Bard, Inc., Senomyx, Inc., Stepan Company, Ashland Global Holdings, Inc. and Teleflex Incorporated (JNJ-US, IFF-US, PFE-US, BCR-US, SNMX-US, SCL-US, ASH-US and TFX-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 3.46 million, Net Earnings of USD 0.90 million.
  • Gross margins narrowed from 63.24% to 53.89% compared to the same period last year, operating (EBITDA) margins now 35.99% from 47.98%.
  • 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:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 3.62 1.89 2.26 2.14 3.46
Revenue Growth (%YOY) 43.86 -52.69 -48.25 -48.13 -4.49
Earnings (mil) 1.22 0.42 0.53 0.41 0.9
Earnings Growth (%YOY) 195.93 -70.16 -64.05 -73.16 -26.07
Net Margin (%) 33.63 22.14 23.21 18.95 26.03
EPS 0.26 0.09 0.11 0.09 0.2
Return on Equity (%) 30.54 10.77 14.1 11.07 25.56
Return on Assets (%) 27.78 9.9 12.82 9.94 23.17

Access our Ratings and Scores for United-Guardian, Inc.

Market Share Versus Profits

Revenues History
Earnings History

UG-US‘s change in revenue this period compared to the same period last year of -4.49% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that UG-US is holding onto its market share. Also, for comparison purposes, revenues changed by 61.63% and earnings by 122.05% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 63.24% to 53.89%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 47.98% to 35.99% in this time frame. For comparison, gross margins were 52.89% and EBITDA margins were 26.01% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

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

UG-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 344.80 days from 375.20 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 46.79% to 35.99% and (2) one-time items that contributed to a decrease in pretax margins from 48.83% to 37.86%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for United-Guardian, Inc.

Company Profile

United-Guardian, Inc. manufactures and markets cosmetic ingredients, personal care products, pharmaceuticals, medical lubricants, health care products, and specialty industrial products. It also conducts research and product development, primarily related to the development of new and unique cosmetic and personal care products. The company focuses on the development of products that fill unmet market needs, have unique properties, and use proprietary technology that it sometimes protects with patents. United-Guardian was founded on September 14, 1987 and is headquartered in Hauppauge, NY.

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 UG-US.