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Exact Sciences Corporation's (NASDAQ:EXAS) Path To Profitability

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 company’s loss has recently broadened since it announced a -US$175.1m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$215.9m, moving it further away from 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.

See our latest analysis for Exact Sciences

Consensus from the 10 Biotechs analysts is EXAS is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$110m in 2021. So, EXAS is predicted to breakeven approximately 2 years from today. What rate will EXAS 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 72%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqCM:EXAS Past and Future Earnings, December 16th 2019

Given this is a high-level overview, I won’t go into details of EXAS’s upcoming projects, but, keep in mind that typically biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing I would like to bring into light with EXAS is its debt-to-equity ratio of 109%. 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:

There are too many aspects of EXAS to cover in one brief article, but the key fundamentals for the company can all be found in one place – EXAS’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors 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.

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.

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