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Starpharma Holdings Limited's (ASX:SPL) Path To Profitability

Starpharma Holdings Limited's (ASX:SPL): Starpharma Holdings Limited engages in the research, development, and commercialization of dendrimer products for pharmaceutical, life-science, and other applications worldwide. The AU$445m market-cap company announced a latest loss of -AU$14.3m on 30 June 2019 for its most recent financial year result. As path to profitability is the topic on SPL’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for SPL.

Check out our latest analysis for Starpharma Holdings

Expectation from Pharmaceuticals analysts is SPL is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$29m in 2022. Therefore, SPL is expected to breakeven roughly 2 years from now. How fast will SPL have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 73% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

ASX:SPL Past and Future Earnings, January 31st 2020
ASX:SPL Past and Future Earnings, January 31st 2020

Underlying developments driving SPL’s growth isn’t the focus of this broad overview, but, take into account that by and large pharmaceuticals, 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.

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One thing I’d like to point out is that SPL has managed its capital judiciously, with debt making up -0.03% of equity. This means that SPL has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of SPL 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 SPL, take a look at SPL’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further examine:

  1. Historical Track Record: What has SPL'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 Starpharma Holdings’s board and the CEO’s back ground.

  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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.