Goofy profit reporting in GenomeWeb

[pmiguel]

I've seen a couple of these recently here and here.

The articles begin by trumpeting increases in revenue:

Affymetrix reported after the close of the market Thursday that its first quarter revenues increased around 7 percent year over year and beat the consensus Wall Street estimate.

Pacific Biosciences reported after the close of the market Wednesday that its first quarter 2014 revenues more than doubled year over year and grew 27 percent sequentially.

But if you look lower, a lot lower, in the text you find:

Affy posted a net loss of $10.5 million, or $.14 per share, for the quarter, compared to a loss of $15.4 million, or $.22 per share, for Q1 2013.

and

The company posted a net loss for the quarter of $18.9 million, or $.28 per share, down from its net loss of $21.1 million

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Phillip

[Richard Finney]

Welcome to Silicon Valley. The game is musical chairs.
Knowing when the Sand Hill insiders are going to stop the music is part of this game.

[MrGuy]

You are mixing up Revenues with Earnings. They aren't the same thing. Revenue is the amount of money the company brought in. Earnings is the expenses (overhead, operations, R&D, etc) that are subtracted from the revenues providing you with Gross Earnings. Net earnings is after taxes and similar.

Thus, a company can spend more money than it makes and tout their great increases in revenues.

[pmiguel]

You are mixing up Revenues with Earnings. They aren't the same thing. Revenue is the amount of money the company brought in. Earnings is the expenses (overhead, operations, R&D, etc) that are subtracted from the revenues providing you with Gross Earnings. Net earnings is after taxes and similar.

Thus, a company can spend more money than it makes and tout their great increases in revenues.

So, out of curiosity, if you see a company that reports increased revenues quarter to quarter are you thinking: "I should buy some of that stock"? That is what I really mean to ask. Is there some intrinsic value in the stock of a company that is showing increased revenues, but negative earnings?

Seems like a company that is losing money should be a bad investment. If that is the case, then it does not seem to me that a news source should be trumpeting increases in revenue in the first paragraph and holding off until the later in the story to mention negative earnings.

However, I have little knowledge in this area.

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Phillip

[Brian Bushnell]

New companies typically have revenue before profits. If revenue is growing fast, and losses are decreasing, that's good; the assumption is that with enough revenue, the company will be profitable. If revenue is flat and the company is losing money, that's bad. If revenue and losses are both increasing at the same rate, that indicates there's something fundamentally wrong with the company's business model.

Investing in companies that have never shown a profit is inherently risky because they may never become profitable, but that does not mean they are a bad investment, just a risky one.