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When Will Biome Grow Inc. (CNSX:BIO) Become Profitable?

Simply Wall St

Biome Grow Inc.'s (CNSX:BIO): Biome Grow Inc. focuses on cannabis growing business in Atlantic Canada region. The CA$65m market-cap company announced a latest loss of -CA$8.9m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on BIO’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for BIO.

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Expectation from Pharmaceuticals analysts is BIO is on the verge of breakeven. They expect the company to post a final loss in 2019, before turning a profit of CA$19m in 2020. Therefore, BIO is expected to breakeven roughly a couple of months from now! In order to meet this breakeven date, I calculated the rate at which BIO must grow year-on-year. It turns out an average annual growth rate of 50% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

CNSX:BIO Past and Future Earnings, May 24th 2019

Given this is a high-level overview, I won’t go into details of BIO’s upcoming projects, but, take into account that by and large a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing I’d like to point out is that BIO has no debt on its balance sheet, which is quite unusual for a cash-burning pharma, which typically has high debt relative to its equity. BIO currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

This article is not intended to be a comprehensive analysis on BIO, so if you are interested in understanding the company at a deeper level, take a look at BIO’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further research:

  1. Valuation: What is BIO 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 BIO 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 Biome Grow’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.