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Exact Sciences Corporation (NASDAQ:EXAS): When Will It Breakeven?

Simply Wall St

Exact Sciences Corporation's (NASDAQ:EXAS): Exact Sciences Corporation, a molecular diagnostics company, focuses on developing products for the early detection and prevention of various cancers in the United States. The US$12b market-cap posted a loss in its most recent financial year of -US$175.1m and a latest trailing-twelve-month loss of -US$218.8m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on EXAS’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for EXAS’s growth and when analysts expect the company to become profitable.

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See our latest analysis for Exact Sciences

According to the 13 industry analysts covering EXAS, the consensus is breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$209m in 2022. Therefore, EXAS is expected to breakeven roughly 3 years from now. In order to meet this breakeven date, I calculated the rate at which EXAS must grow year-on-year. It turns out an average annual growth rate of 72% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqCM:EXAS Past and Future Earnings, May 23rd 2019

Given this is a high-level overview, I won’t go into details of EXAS’s upcoming projects, but, bear in mind that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one issue worth mentioning. EXAS currently has a debt-to-equity ratio of 105%. Typically, debt shouldn’t exceed 40% of your equity, and EXAS has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on EXAS, so if you are interested in understanding the company at a deeper level, take a look at EXAS’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should further examine:

  1. Valuation: What is EXAS 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 EXAS is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Exact Sciences’s board and the CEO’s back ground.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.