AdAlta Limited (ASX:1AD): Is Breakeven Near?

With the business potentially at an important milestone, we thought we'd take a closer look at AdAlta Limited's (ASX:1AD) future prospects. AdAlta Limited, a drug discovery and development company, develops protein therapeutics. With the latest financial year loss of AU$5.9m and a trailing-twelve-month loss of AU$8.3m, the AU$18m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which AdAlta will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for AdAlta

AdAlta is bordering on breakeven, according to some Australian Biotechs analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$19m in 2021. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 186% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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We're not going to go through company-specific developments for AdAlta given that this is a high-level summary, but, take into account that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 28% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on AdAlta, so if you are interested in understanding the company at a deeper level, take a look at AdAlta's company page on Simply Wall St. We've also put together a list of key aspects you should further research:

1. Historical Track Record: What has AdAlta's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on AdAlta's board and the CEO’s background.

3. 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.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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