Yahoo Finance When Will Pacific Edge Limited (NZSE:PEB) Become Profitable?
Pacific Edge Limited (NZSE:PEB) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Pacific Edge Limited, a cancer diagnostic company, researches, develops, and commercializes diagnostic and prognostic tools for the early detection and management of cancers in New Zealand, the United States, and internationally. The NZ$537m market-cap company announced a latest loss of NZ$19m on 31 March 2020 for its most recent financial year result. The most pressing concern for investors is Pacific Edge's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
See our latest analysis for Pacific Edge
According to the 2 industry analysts covering Pacific Edge, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of NZ$9.0m in 2022. The company is therefore projected to breakeven around 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 98%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Pacific Edge's upcoming projects, however, keep in mind 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 that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before we wrap up, there’s one aspect worth mentioning. Pacific Edge 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 the company 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.
Next Steps:
There are key fundamentals of Pacific Edge which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Pacific Edge, take a look at Pacific Edge's company page on Simply Wall St. We've also put together a list of essential aspects you should look at:
Historical Track Record: What has Pacific Edge'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 Pacific Edge's board and the CEO’s background.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
