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

Simply Wall St
·3-min read

With the business potentially at an important milestone, we thought we'd take a closer look at Starpharma Holdings Limited's (ASX:SPL) future prospects. Starpharma Holdings Limited engages in the research, development, and commercialization of dendrimer products for pharmaceutical, life-science, and other applications worldwide. On 30 June 2020, the AU$588m market-cap company posted a loss of AU$15m for its most recent financial year. As path to profitability is the topic on Starpharma Holdings' investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Starpharma Holdings

According to the 2 industry analysts covering Starpharma Holdings, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$7.6m in 2022. Therefore, the company is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 71% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Starpharma Holdings given that this is a high-level summary, however, keep in mind that by and large a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we’d like to point out is that Starpharma Holdings has no debt on its balance sheet, which is rare for a loss-making pharma, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

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

  1. Valuation: What is Starpharma Holdings 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 Starpharma Holdings is currently mispriced by the market.

  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 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. 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.