Elanco Animal Health Incorporated (NYSE:ELAN): Is Breakeven Near?
We feel now is a pretty good time to analyse Elanco Animal Health Incorporated's (NYSE:ELAN) business as it appears the company may be on the cusp of a considerable accomplishment. Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals. The company’s loss has recently broadened since it announced a US$78m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$113m, moving it further away from breakeven. Many investors are wondering about the rate at which Elanco Animal Health will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
View our latest analysis for Elanco Animal Health
Consensus from 8 of the American Pharmaceuticals analysts is that Elanco Animal Health is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$44m in 2024. Therefore, the company is expected to breakeven just over a year from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 60% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Elanco Animal Health's growth isn’t the focus of this broad overview, however, bear in mind 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.
Before we wrap up, there’s one issue worth mentioning. Elanco Animal Health currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Elanco Animal Health's case is 82%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Elanco Animal Health, so if you are interested in understanding the company at a deeper level, take a look at Elanco Animal Health's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:
Valuation: What is Elanco Animal Health 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 Elanco Animal Health 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 Elanco Animal Health’s board and the CEO’s background.
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.
