Evolus, Inc.’s (NASDAQ:EOLS): Evolus, Inc. provides medical aesthetic products for physicians and their patients in the United States. With the latest financial year loss of -US$4.5m and a trailing-twelve month of -US$30.0m, the US$697m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is EOLS’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for EOLS.
EOLS is bordering on breakeven, according to the 6 Pharmaceuticals analysts. They expect the company to post a final loss in 2020, before turning a profit of US$63m in 2021. Therefore, EOLS is expected to breakeven roughly 2 years from today. What rate will EOLS have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 56%, 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 EOLS given that this is a high-level summary, however, keep in mind that by and large a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. 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 EOLS 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 EOLS 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.
This article is not intended to be a comprehensive analysis on EOLS, so if you are interested in understanding the company at a deeper level, take a look at EOLS’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should look at:
- Valuation: What is EOLS 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 EOLS 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 Evolus’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.
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