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When Will CannPal Animal Therapeutics Limited (ASX:CP1) Become Profitable?

Simply Wall St

CannPal Animal Therapeutics Limited's (ASX:CP1): CannPal Animal Therapeutics Limited engages in the research and development of animal health products in Australia. The AU$12m market-cap company announced a latest loss of -AU$2.0m on 30 June 2019 for its most recent financial year result. Many investors are wondering the rate at which CP1 will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for CP1’s growth and when analysts expect the company to become profitable.

See our latest analysis for CannPal Animal Therapeutics

Expectation from Pharmaceuticals analysts is CP1 is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$4.0m in 2021. Therefore, CP1 is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, I calculated the rate at which CP1 must grow year-on-year. It turns out an average annual growth rate of 132% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

ASX:CP1 Past and Future Earnings, November 6th 2019

I’m not going to go through company-specific developments for CP1 given that this is a high-level summary, though, take into account that typically pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing I’d like to point out is that CP1 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. This means that CP1 has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of CP1 which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at CP1, take a look at CP1’s company page on Simply Wall St. I’ve also put together a list of key aspects you should further research:

  1. Valuation: What is CP1 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 CP1 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 CannPal Animal Therapeutics’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.