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Edesa Biotech, Inc. (NASDAQ:EDSA): Are Analysts Optimistic?

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·3 min read
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With the business potentially at an important milestone, we thought we'd take a closer look at Edesa Biotech, Inc.'s (NASDAQ:EDSA) future prospects. Edesa Biotech, Inc., a biopharmaceutical company, engages in acquiring, developing, and commercializing clinical-stage drugs for inflammatory and immune-related diseases with clear unmet medical needs. The US$30m market-cap company posted a loss in its most recent financial year of US$13m and a latest trailing-twelve-month loss of US$17m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Edesa Biotech's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Edesa Biotech

According to the 3 industry analysts covering Edesa Biotech, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$15m in 2023. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 68%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving Edesa Biotech's growth isn’t the focus of this broad overview, however, keep in mind that by and large biotechs, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. Edesa Biotech currently has no debt on its balance sheet, which is rare for a loss-making biotech, which usually has a high level of debt relative to its equity. This means that the company 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 Edesa Biotech which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Edesa Biotech, take a look at Edesa Biotech's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:

  1. Historical Track Record: What has Edesa Biotech'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.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Edesa Biotech's board and the CEO’s background.

  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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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