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Palla Pharma Limited (ASX:PAL) About To Shift From Loss To Profit

·3-min read

Palla Pharma Limited (ASX:PAL) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Palla Pharma Limited, a vertically integrated pharmaceutical company, produces and distributes narcotic raw materials, active pharmaceutical ingredients, and finished dosage formulations for pharmaceutical markets in Australia and Norway. The company’s loss has recently broadened since it announced a AU$35m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$59m, moving it further away from breakeven. Many investors are wondering about the rate at which Palla Pharma 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.

Check out our latest analysis for Palla Pharma

Palla Pharma is bordering on breakeven, according to some Australian Life Sciences analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$3.4m in 2021. So, the company is predicted to breakeven approximately 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 166%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.


Underlying developments driving Palla Pharma's growth isn’t the focus of this broad overview, but, keep in mind that generally a life science company has lumpy cash flows which are contingent on the product and stage of development the company is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Palla Pharma currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Palla Pharma's case is 75%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

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

  1. Historical Track Record: What has Palla Pharma'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 Palla Pharma'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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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