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Amarin Corporation plc's (NASDAQ:AMRN): Amarin Corporation plc, a pharmaceutical company, engages in the development and commercialization of therapeutics for the treatment of cardiovascular diseases in the United States. With the latest financial year loss of -US$116.4m and a trailing-twelve month of -US$116.8m, the US$5.8b market-cap amplifies its loss by moving further away from its breakeven target. As path to profitability is the topic on AMRN’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for AMRN’s growth and when analysts expect the company to become profitable.
According to the 4 industry analysts covering AMRN, the consensus is breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of US$50m in 2020. AMRN is therefore projected to breakeven around a few months from now. What rate will AMRN 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 68%, which is extremely buoyant. If this rate turns out to be too aggressive, AMRN may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of AMRN’s upcoming projects, however, keep in mind 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 issue worth mentioning. AMRN currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in AMRN’s case is 59%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on AMRN, so if you are interested in understanding the company at a deeper level, take a look at AMRN’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further examine:
Valuation: What is AMRN 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 AMRN 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 Amarin’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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.