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Avid Bioservices, Inc. (NASDAQ:CDMO): Is Breakeven Near?

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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. On 30 April 2020, the US$437m market-cap posted a loss of US$15.2m for its most recent financial year. Many investors are wondering the rate at which CDMO will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for CDMO.

See our latest analysis for Avid Bioservices

Consensus from the 3 Biotechs analysts is CDMO is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$2.5m in 2022. CDMO is therefore projected to breakeven around 2 years from now. What rate will CDMO 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 99%, 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

I’m not going to go through company-specific developments for CDMO given that this is a high-level summary, but, take into account that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one aspect worth mentioning. CDMO has managed its capital judiciously, 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 put together a list of relevant aspects 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.