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Avid Bioservices, Inc.'s (NASDAQ:CDMO) Path To Profitability

Simply Wall St

Avid Bioservices, Inc.'s (NASDAQ:CDMO): Avid Bioservices, Inc., a contract development and manufacturing organization, provides process development and Current Good Manufacturing Practices (CGMP) commercial manufacturing services focused on biopharmaceutical products derived from mammalian cell culture for biotechnology and pharmaceutical companies. The US$378m market-cap company announced a latest loss of -US$9.7m on 30 April 2019 for its most recent financial year result. As path to profitability is the topic on CDMO’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for CDMO.

View our latest analysis for Avid Bioservices

According to the 3 industry analysts covering CDMO, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$8.8m in 2021. CDMO is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, I calculated the rate at which CDMO must grow year-on-year. It turns out an average annual growth rate of 76% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqCM:CDMO Past and Future Earnings, July 31st 2019

Given this is a high-level overview, I won’t go into details of CDMO’s upcoming projects, though, take into account 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 0.2% 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 examine:

  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.