Sarepta Therapeutics, Inc.'s (NASDAQ:SRPT): Sarepta Therapeutics, Inc. focuses on the discovery and development of RNA-based therapeutics, gene therapy, and other genetic medicine approaches for the treatment of rare diseases. The US$8.4b market-cap posted a loss in its most recent financial year of -US$361.9m and a latest trailing-twelve-month loss of -US$620.3m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is SRPT’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for SRPT, its year of breakeven and its implied growth rate.
According to the 22 industry analysts covering SRPT, the consensus is breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$676m in 2022. SRPT is therefore projected to breakeven around 3 years from now. What rate will SRPT 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 68%, which is rather optimistic! If this rate turns out to be too aggressive, SRPT may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for SRPT given that this is a high-level summary, though, bear 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing I would like to bring into light with SRPT is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in SRPT’s case is 44%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on SRPT, so if you are interested in understanding the company at a deeper level, take a look at SRPT’s company page on Simply Wall St. I’ve also put together a list of relevant aspects you should look at:
- Valuation: What is SRPT 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 SRPT 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 Sarepta Therapeutics’s board and the CEO’s back ground.
- 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.
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