Pharnext SA's (EPA:ALPHA): Pharnext SA, a clinical-stage biopharmaceutical company, develops therapeutics for severe orphan and common neurodegenerative diseases in France. The €98m market-cap company announced a latest loss of -€21.3m on 31 December 2018 for its most recent financial year result. Many investors are wondering the rate at which ALPHA will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for ALPHA.
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According to the industry analysts covering ALPHA, breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of €24m in 2020. ALPHA is therefore projected to breakeven around a couple of months from now! In order to meet this breakeven date, I calculated the rate at which ALPHA must grow year-on-year. It turns out an average annual growth rate of 103% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for ALPHA given that this is a high-level summary, however, take into account that generally biotechs, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. ALPHA currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. Oftentimes, losses exist only on paper but other times, it can be a red flag.
Next Steps:
This article is not intended to be a comprehensive analysis on ALPHA, so if you are interested in understanding the company at a deeper level, take a look at ALPHA’s company page on Simply Wall St. I’ve also put together a list of key factors you should further examine:
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Valuation: What is ALPHA worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether ALPHA is currently mispriced by the market.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Pharnext’s board and the CEO’s back ground.
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Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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