Conatus Pharmaceuticals Inc’s (NASDAQ:CNAT): Conatus Pharmaceuticals Inc., a biotechnology company, focuses on the development and commercialization of novel medicines for the treatment of liver diseases in the United States. With the latest financial year loss of -US$17.4m and a trailing-twelve month of -US$18.5m, the US$148m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is CNAT’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for CNAT, its year of breakeven and its implied growth rate.
CNAT is bordering on breakeven, according to Biotechs analysts. They expect the company to post a final loss in 2018, before turning a profit of US$1.2m in 2019. So, CNAT is predicted to breakeven approximately a few months from now. In order to meet this breakeven date, I calculated the rate at which CNAT must grow year-on-year. It turns out an average annual growth rate of 88% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for CNAT given that this is a high-level summary, but, bear in mind that generally biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I would like to bring into light with CNAT is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in CNAT’s case is 83%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are too many aspects of CNAT to cover in one brief article, but the key fundamentals for the company can all be found in one place – CNAT’s company page on Simply Wall St. I’ve also put together a list of essential factors you should look at:
- Historical Track Record: What has CNAT’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Conatus Pharmaceuticals’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.