MGC Pharmaceuticals Limited's (ASX:MXC): MGC Pharmaceuticals Limited, a biopharmaceutical company, produces and supplies medicinal cannabis products in Australia, Slovenia, and other European countries. The AU$70m market-cap posted a loss in its most recent financial year of -AU$8.2m and a latest trailing-twelve-month loss of -AU$258.6k shrinking the gap between loss and breakeven. As path to profitability is the topic on MXC’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for MXC, its year of breakeven and its implied growth rate.
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According to the 2 industry analysts covering MXC, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$9.6m in 2021. Therefore, MXC is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which MXC must grow year-on-year. It turns out an average annual growth rate of 84% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, MXC may become profitable much later than analysts predict.
Underlying developments driving MXC’s growth isn’t the focus of this broad overview, but, bear in mind that by and large pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I’d like to point out is that MXC has managed its capital judiciously, with debt making up 0.2% of equity. This means that MXC has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
There are key fundamentals of MXC which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at MXC, take a look at MXC’s company page on Simply Wall St. I’ve also put together a list of key factors you should look at:
- Historical Track Record: What has MXC'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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on MGC Pharmaceuticals’s board and the CEO’s back ground.
- 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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.