Does Amarin Deserve a Spot in Your Portfolio after Earnings ?

Amarin NASDAQ: AMRN, a penny stock that has caught the attention of speculators and serious investors alike has recently reported its Q2'22 earnings card that came with mixed results. The company's EPS finished on -$0.09, missing its consensus EPS target of $0.03. Some positive news for the company was that it managed to beat its revenue estimate by $6.19M, for a total of $94.4M.

The company's revenue is currently down -38.9% YoY. Reasons for the company's under performance were given in the earnings report. These factors included additional competition in the US market from generic brands of medication contracting sales, the ongoing COVID-19 pandemic, as well as difficulties in accessing international markets such as Europe. Amarin has continued to decline to give revenue guidance for the rest of this year.

Earnings Call Highlights

As part of releasing its Q2'22 results, executives at Amarin also took part in an earnings call to discuss the findings. Amarin CEO Karim Mikhail stated that the company continues to face pressure from generic medication alternatives. On a positive note, he also stated that the company delivered a "positive contribution margin, allowing Amarin to self-fund the expansion of Europe and internationally."

Mikhail went onto say that the company has undergone two significant restructurings. The restructurings were designed to improve the cost structure of the business so that it is better prepared to deal with the dynamism of the US market. Other aspects of this strategy included making 10 market access filings in Europe and regulatory filings in other parts of the world.

Another key update from Mikhail was that Amarin is making headway into European markets through the creation of "sustainable and diverse revenue streams across the continent." In this endeavour, the company recorded its final positive reimbursement from NICE for patients in England with a net price of USD 176. 

Amarin’s Valuation and Profitability

Amarin has a competitive valuation on a relative basis for several key ratios when compared to its market sector. This strong valuation partially stems from its low share price but it is still worth considering. The company's FWD Price / Sales ratio is 1.38 compared to the sector's 4.89. Other ratios are not so favorable, such as its EV / EBITDA ratio of 545.10 to the sector's 16.38. The company's assets are also performing well, as its FWD Price / Book is 0.90 to the sector's 2.82.

Something that bulls are noting about Amarin is that its margins are quite competitive when compared to its peers. This gives the company the potential of earning more as its revenues increase. The company's gross profit margin is 78.49% to the sector's 54.90%, or a 42.96% difference. Still, the company's cost basis is still quite high as it is significantly underperforming the sector for its EBITDA margin that stands at 0.07% while the sector pulls ahead at 4.46%.

Comparing AMRN's ratios to a company of a similar market cap, sector, and industry such as Inovio Pharmaceuticals Inc NASDAQ: INO, is revealing. INO's shares are trading at levels 2x higher than Amarin, but historically it is still a penny stock. INO has a FWD revenue growth of 6.05% while AMRN is expected to contract -18.66%. INO also trades at an exponentially higher Price / Sales ratio of 292.36 compared to AMRN's 0.94. Over the last ten years, INO delivered a 5.77% return to investors while AMRN delivered a -89.35% loss.

Amarin’s Analyst Ratings

Amarin currently has a consensus rating of hold. Eight analysts have rated this stock over the last 90 days. It has received 2 strong buy ratings, 4 hold ratings and 2 sell ratings. In terms of the stock's price target, analysts have been optimistic, as they have collectively overestimated the company's share price performance for the last five years. The company currently has a 96.9% upside to the MarketBeat consensus price target.