Sarepta Therapeutics, Inc.’s (NASDAQ:SRPT): Sarepta Therapeutics, Inc. focuses on the discovery and development of RNA-based therapeutics, gene therapy, and other genetic medicine approaches for the treatment of rare neuromuscular diseases. The US$8.7b market-cap posted a loss in its most recent financial year of -US$50.7m and a latest trailing-twelve-month loss of -US$245.0m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is SRPT’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for SRPT.
According to the 21 industry analysts covering SRPT, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$527m in 2021. Therefore, SRPT is expected to breakeven roughly 3 years from today. How fast will SRPT have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 75% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, SRPT may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for SRPT given that this is a high-level summary, however, keep in mind that typically biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I would like to bring into light with SRPT is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in SRPT’s case is 65%. 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 SRPT, so if you are interested in understanding the company at a deeper level, take a look at SRPT’s company page on Simply Wall St. I’ve also put together a list of relevant aspects you should further research:
- Valuation: What is SRPT 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 SRPT 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 Sarepta Therapeutics’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.