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When Will Avid Bioservices, Inc. (NASDAQ:CDMO) Breakeven?

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Simply Wall St
·3 min read
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Avid Bioservices, Inc.'s (NASDAQ:CDMO): Avid Bioservices, Inc., a contract development and manufacturing organization, provides process development and current good manufacturing practices (CGMP) clinical and commercial manufacturing services focused on biopharmaceutical drug substances derived from mammalian cell culture. The US$437m market-cap company announced a latest loss of US$15.2m on 30 April 2020 for its most recent financial year result. The most pressing concern for investors is CDMO’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for CDMO’s growth and when analysts expect the company to become profitable.

View our latest analysis for Avid Bioservices

CDMO is bordering on breakeven, according to the 3 Biotechs analysts. They expect the company to post a final loss in 2021, before turning a profit of US$2.5m in 2022. So, CDMO is predicted to breakeven approximately 2 years from now. How fast will CDMO have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 99% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

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

Underlying developments driving CDMO’s growth isn’t the focus of this broad overview, though, keep in mind that by and large a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one aspect worth mentioning. CDMO has managed its capital prudently, with debt making up 10% of equity. This means that CDMO 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 CDMO to cover in one brief article, but the key fundamentals for the company can all be found in one place – CDMO’s company page on Simply Wall St. I’ve also compiled a list of important factors you should further research:

  1. Valuation: What is CDMO 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 CDMO 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 Avid Bioservices’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.

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.