I disagree with Bioshares.

Bioshares has this week reported on the Half Year financials from Cellestis.


They note that the previous sales growth rate has ceased in the half and recommend a sell of CST shares. Now they are entitled to make that call (and their readers are entitled to follow it or not). However, in my opinion, their analysis of the figures is far too shallow for it to drive a valid conclusion. 


I can't work out how they got a fall in NPAT of 23%, I make it as being a little under 20%.


That aside, they seem to feel that it is appropriate to calculate an "Annualized PE" (of 55) by simply taking the NPAT for H1 and doubling it. Maybe that would work for a stable old business that is going nowhere but it simply makes no sense for a company like Cellestis that is in the dynamic growth phase. 


We know that the CST Sales growth was stunted in the last half by a number of factors

• - The GFC
• - The delay in the launch of In-Tube in Japan
• - The rise in the $A

In-Tube has now been launched in Japan and we can expect a stronger flow of Sales in Japan in the next half. Particularly as the distributor ran down their stocks of the old product in the last half.

In my opinion, whilst the $A is likely to remain at current (relatively high) levels in the next half, it is unlikely to move upwards in such a dramatic fashion as it did in the last half. Whilst the high $A will continue to have an absolute impact on Sales, it will not have the same impact on sales growth as we saw in the last half.

Lodge Partners in their recent report estimated a Full Year EPS of 8.5c. At a share price of $3.30, that puts the forward PE at 38. 

We can't say who is closer to the truth. However, we can say that it is dangerous to make investment decisions based upon a single extraordinary event - particularly if we are in a position to examine and understand that event. It is situations like this that give the serious investor the possibility of "beating the market". This concept doesn't only apply to CST but to all our investments.


Addendum.


As "Guppy Trader" points out in his comment below, CST typically makes 40% of it's annual sales in the first half. If we were to apply that to this year's figures (and assume that NPAT runs in parallel to sales), the NPAT for the Full Year comes in just about spot on the Lodge Partners estimate. Of course we have no guarantee that sales will follow that path this year. In fact (putting on the glasses with a nice shade of pink) we might think that the H1 results are below par and, if sales were to resume at least some of the growth pattern in H2 that H2 may perhaps contribute more than 60% to the FY result.