Kala Pharmaceuticals Q3 Earnings: Time To Buy Struggling NasdaqGS:KALA Stock?

in EARNINGS/INVESTING IDEAS by

Kala Pharmaceuticals, Inc. (NasdaqGS:KALA) is scheduled to report Q3 earnings results on November 5, 2020.

The company is expected to report earnings of -$0.45/share on revenue of $2.008 million. The consensus earnings per share (EPS) of -$0.45/share is based on a poll of 4 analysts and represents a growth in eps of 33.3% over the same quarter last year, when the company reported earnings of -$0.68/share.

The revenue forecast of $2.008 million based on a poll of 6 analysts implies a year-over-year (YoY) growth in revenue of 38.4%. Last year the company reported $1.451 million in revenue for the quarter.

Expected to report EPS of -$0.45/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $2.01 $1.45 38.4%
EPS -$0.45 -$0.68 33.3%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 8 tracked quarters, and missed expectations 5 quarters.

What are your expectations from Kala Pharmaceuticals, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.38 -$0.42 -11.4% Missed
Q1, 2020 -$0.45 -$0.54 -20.0% Missed
Q4, 2019 -$0.62 -$0.63 -1.2% Missed
Q3, 2019 -$0.65 -$0.68 -5.0% Missed
Q2, 2019 -$0.74 -$0.70 5.6% Beat
Q1, 2019 -$0.81 -$0.75 6.9% Beat
Q4, 2018 -$0.53 -$0.75 -40.0% Missed
Q3, 2018 -$0.64 -$0.63 1.6% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −2.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $9.17 $8.92 −2.7% Decline
May 7, 2020 $11.62 $11.30 −2.8% Decline
February 12, 2020 $6.39 $6.62 3.5% Increase
November 7, 2019 $3.84 $4.11 7.0% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.24, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.24 implies a 1.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Kala Pharmaceuticals, Inc. is currently trading at $6.60/share, down −5.3% for the day. The company is trading at approximately 45.0% of its 52-week high of $14.68/share. The company’s stock price is down −26.0% since the last earnings report and down −14.8% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 32.33 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:KALA Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −4.09 and a forward P/E multiple of −4.26.

Kala Pharmaceuticals, Inc.’s current share price also implies a price-to-book (P/B) multiple of 2.87. The following table summarizes some other key fundamental ratios:

Data as of November 1, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $6.60
P/E Ratio −4.1x
P/E Ratio (Fwd) −4.3x
PEG Ratio −0.2
Total Debt / Total Capital 20.5%
Levered Free Cash Flow -$81.565 million
EV / EBITDA −3.5x

Finbox

Kala Pharmaceuticals, Inc. is a small-cap stock with a market capitalization of $370 million and a total enterprise value of $286.5 million. The company operates in the Healthcare sector and the Pharmaceuticals industry.

Kala Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the development and commercialization of therapies using its proprietary nanoparticle-based Mucus Penetrating Particles (MPP) technology for the treatment of eye diseases. The company’s lead product candidate is KPI-121 0.25% which has completed two Phase III clinical trials for the treatment of temporary relief of the signs and symptoms of dry eye disease; INVELTYS which has completed two Phase III clinical trials for the treatment of inflammation and pain following ocular surgery; and KPI-285, a MPP receptor tyrosine kinase inhibitor program, which is in preclinical studies for the treatment of retinal diseases. The company was formerly known as Hanes Newco, Inc. and changed its name to Kala Pharmaceuticals, Inc. in December 2009. Kala Pharmaceuticals, Inc. was founded in 2009 and is headquartered in Watertown, Massachusetts.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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