U.S. Markets close in 20 mins

Allergan plc's (NYSE:AGN) Profit Outlook

Simply Wall St

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Allergan plc's (NYSE:AGN): Allergan plc, a pharmaceutical company, develops, manufactures, and commercializes branded pharmaceutical, device, biologic, surgical, and regenerative medicine products worldwide. The US$38b market-cap posted a loss in its most recent financial year of -US$5.1b and a latest trailing-twelve-month loss of -US$7.2b leading to an even wider gap between loss and breakeven. The most pressing concern for investors is AGN’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for AGN, its year of breakeven and its implied growth rate.

See our latest analysis for Allergan

According to the 21 industry analysts covering AGN, the consensus is breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of US$869m in 2020. AGN is therefore projected to breakeven around a couple of months from now! In order to meet this breakeven date, I calculated the rate at which AGN must grow year-on-year. It turns out an average annual growth rate of 88% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NYSE:AGN Past and Future Earnings, June 15th 2019

I’m not going to go through company-specific developments for AGN given that this is a high-level summary, though, take into account that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one aspect worth mentioning. AGN has managed its capital prudently, with debt making up 38% of equity. This means that AGN 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 too many aspects of AGN to cover in one brief article, but the key fundamentals for the company can all be found in one place – AGN’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should further research:

  1. Valuation: What is AGN 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 AGN 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 Allergan’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.

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.

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. Thank you for reading.