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Evoke Pharma Inc’s (NASDAQ:EVOK): Evoke Pharma, Inc., a specialty pharmaceutical company, primarily focuses on the development of drugs for the treatment of gastroenterological disorders and diseases. On 31 December 2017, the US$41.83M market-cap posted a loss of -US$12.23M for its most recent financial year. Many investors are wondering the rate at which EVOK will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for EVOK’s growth and when analysts expect the company to become profitable.
According to the industry analysts covering EVOK, breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$23.66M in 2020. Therefore, EVOK is expected to breakeven roughly 2 years from today. How fast will EVOK have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 53.92% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, EVOK may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into detail the detail of EVOK’s upcoming projects, but, bear in mind that typically pharmaceuticals, 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.
One thing I’d like to point out is that EVOK has no debt on its balance sheet, which is quite unusual for a cash-burning pharma, which usually has a high level of debt relative to its equity. This means that EVOK 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.
There are key fundamentals of EVOK 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 EVOK, take a look at EVOK’s company page on Simply Wall St. I’ve also compiled a list of relevant factors you should further research:
Valuation: What is EVOK 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 EVOK 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 Evoke Pharma’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 pass 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.