Spectral Medical Inc.'s (TSE:EDT): Spectral Medical Inc. focuses on the development and commercialization of treatment for septic shock in North America. The CA$149m market-cap posted a loss in its most recent financial year of -CA$4.9m and a latest trailing-twelve-month loss of -CA$7.3m leading to an even wider gap between loss and breakeven. Many investors are wondering the rate at which EDT will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for EDT.
Expectation from Biotechs analysts is EDT is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of CA$34m in 2022. EDT is therefore projected to breakeven around 2 years from today. What rate will EDT have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 98%, which signals high confidence from analysts. If this rate turns out to be too aggressive, EDT may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for EDT given that this is a high-level summary, but, take into account that by and large biotechs, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I’d like to point out is that EDT 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. EDT currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
There are too many aspects of EDT to cover in one brief article, but the key fundamentals for the company can all be found in one place – EDT’s company page on Simply Wall St. I’ve also put together a list of essential factors you should look at:
- Valuation: What is EDT 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 EDT 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 Spectral Medical’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.
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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