Hims & Hers Health (NYSE:HIMS) is set to report its earnings on Monday, Feb 24 after market close. HIMS stock plunged over 25% on Friday, Feb 21, after the U.S. FDA announced semaglutide is no longer in shortage. Hims & Hers offers compounded semaglutide to patients struggling with supply barriers related to Novo Nordisk’s popular drugs – Wegovy and Ozempic. Both medications contain semaglutide, a GLP-1 drug experiencing soaring demand. Hims & Hers’ offerings will now be limited to personalized treatments, in compliance with the applicable laws and regulations.
However, the shortages during Q4 should translate into strong results for the company. Analysts expect earnings per share to reach $0.22, marking a significant increase from $0.05 reported in the same quarter last year. Revenue is projected to hit $470.5 million, representing a 91% growth compared to the year-ago period.
The company has $11 Bil in current market capitalization. Revenue over the last twelve months was $1.2 Bil, and the company was operationally profitable with $43 Mil in operating profits and net income of $101 Mil. While a lot will depend on how results stack up against consensus and expectations, understanding historical patterns might just turn the odds in your favor if you are an event-driven trader. There are two ways to do that – understand the historical odds and position yourself prior to the event, or look at the correlation between immediate return and medium-term return post earnings and position yourself accordingly post-event.
Hims & Hers Health’s Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post earnings returns:
- In the past 5 years, 16 earnings data points recorded, with 8 positive and 8 negative one-day (1D) returns observed. In summary, positive 1D returns seen about 50% of the times.
- In fact, this percentage has increased to 55% if we consider last 3 year data instead of 5.
- Median of the 8 positive returns = 8.8%, and median of the 8 negative returns =-7.3%
Additional data for observed returns 5-days (5D), and 30-days (30D) post earnings are summarized along with the statistics, in the table below.
Correlation Between 1D, 5D and 30D Historical Returns
A relatively less risky strategy (though not useful if correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has highest correlation and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to correlation between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Sometimes, peer performance can have influence on post-earnings stock-reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on past post-earnings performance of Hims & Hers Health stock compared with stock performance of peers that reported earnings just prior to Hims & Hers Health. For fair comparison, peer stock returns also represent post-earnings one day (1D) return.
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