Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Cynata Therapeutics Limited's (ASX:CYP): Cynata Therapeutics Limited, together with its subsidiaries, develops and commercializes a proprietary mesenchymal stem cell technology under the Cymerus brand name for human therapeutic use in Australia. The company’s loss has recently broadened since it announced a -AU$4.6m loss in the full financial year, compared to the latest trailing-twelve-month loss of -AU$5.7m, moving it further away from breakeven. Many investors are wondering the rate at which CYP will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for CYP, its year of breakeven and its implied growth rate.
CYP is bordering on breakeven, according to the 2 Biotechs analysts. They expect the company to post a final loss in 2019, before turning a profit of AU$4.0m in 2020. Therefore, CYP is expected to breakeven roughly a couple of months from now! How fast will CYP have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 124% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, CYP may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for CYP given that this is a high-level summary, however, take into account that by and large biotechs, 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.
Before I wrap up, there’s one aspect worth mentioning. CYP currently has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which usually has a high level of debt relative to its equity. This means that CYP has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
There are too many aspects of CYP to cover in one brief article, but the key fundamentals for the company can all be found in one place – CYP’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should further examine:
- Valuation: What is CYP 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 CYP is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cynata Therapeutics’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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.