Champions Oncology Inc. (CSBR:NASDAQ) just reported Q1 fiscal year 2023 (FY23) results "demonstrated consistent strength in the underlying business," reported ROTH Capital Partners analyst Scott Henry in a September 21, 2022 research note. ROTH maintained its Buy rating on this firm that provides research and development solutions and services to oncology drug developers.
Revenue during the quarter was $13.7 million ($13.7M), slightly above ROTH's estimate of $13.4M. The New Jersey-based company spent $7M during the quarter, right around ROTH's forecast of $6.9M.
"We highlight Champions as an emerging small-cap investment that is not already well known," Henry wrote. "The fundamentals that we find appealing include 1) revenue growth consistently near 20%, 2) a base business that is turning cash flow positive, and 3) a balance sheet absent of debt."
Henry summarized Champions' results for Q1 FY23, the quarter that ended July 31, 2022, noting they were in line with expectations. Revenue during the quarter was $13.7 million ($13.7M), slightly above ROTH's estimate of $13.4M. The New Jersey-based company spent $7M during the quarter, right around ROTH's forecast of $6.9M.
Gross margin during Q1 FY23, however, was lower than ROTH expected, coming in at 48.7% versus 52.5%. This led to a gross profit that was about $350,000 under ROTH's estimate. The net earnings per share (EPS) loss for the quarter was a miss at $0.02; ROTH projected an EPS gain of $0.01.
"Revenue strength was offset by lower gross margins, which prevented bottom line upside and slightly reduced our FY23 and FY24 EPS targets," Henry wrote. Revised targets are $0.15 and $0.40, down from $0.20 and $0.45, respectively.
On the positive side, Champions reiterated its guidance of about 20% revenue growth for FY23.
"This is particularly impressive given that the software-as-a-service business has yet to make meaningful contributions," wrote Henry.
Despite projected revenue growth and based on an expected slight drop in Champions' FY23 profit, ROTH lowered its target price to $15 per share from $16 on the biotech. Its current share price, in comparison, is about $7.91.
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Disclosures For Roth Capital Partners, Champions Oncology Inc., September 21, 2022
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: ROTH makes a market in shares of Champions Oncology, Inc and as such, buys and sells from customers on a principal basis. Within the last twelve months, ROTH has received compensation for non-investment banking securities-related services from Champions Oncology, Inc.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report.
Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH.
