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We feel now is a pretty good time to analyse ProPhase Labs, Inc.'s (NASDAQ:PRPH) business as it appears the company may be on the cusp of a considerable accomplishment. ProPhase Labs, Inc. engages in the research, development, manufacture, distribution, marketing, and sale of over-the-counter (OTC) consumer healthcare products and dietary supplements in the United States. With the latest financial year loss of US$3.1m and a trailing-twelve-month loss of US$1.7m, the US$158m market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is ProPhase Labs' path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
According to some industry analysts covering ProPhase Labs, breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$27m in 2021. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 245% year-on-year, on average, 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.
We're not going to go through company-specific developments for ProPhase Labs given that this is a high-level summary, but, take into account that typically pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
Before we wrap up, there’s one issue worth mentioning. ProPhase Labs currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in ProPhase Labs' case is 93%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on ProPhase Labs, so if you are interested in understanding the company at a deeper level, take a look at ProPhase Labs' company page on Simply Wall St. We've also put together a list of essential factors you should look at:
Valuation: What is ProPhase Labs 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 ProPhase Labs 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 ProPhase Labs’s board and the CEO’s background.
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.
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