Adamas Pharmaceuticals Inc’s (NASDAQ:ADMS): Adamas Pharmaceuticals, Inc. discovers, develops, and sells therapies for chronic neurologic disorders. The US$543m market-cap posted a loss in its most recent financial year of -US$89m and a latest trailing-twelve-month loss of -US$122m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is ADMS’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for ADMS, its year of breakeven and its implied growth rate.
Expectation from Biotechs analysts is ADMS is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$40m in 2021. ADMS is therefore projected to breakeven around a couple of months from now! How fast will ADMS have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 67% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of ADMS’s upcoming projects, but, take into account that typically biotechs, 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.
Before I wrap up, there’s one issue worth mentioning. ADMS currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in ADMS’s case is 78%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of ADMS to cover in one brief article, but the key fundamentals for the company can all be found in one place – ADMS’s company page on Simply Wall St. I’ve also compiled a list of key aspects you should look at:
- Valuation: What is ADMS 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 ADMS 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 Adamas Pharmaceuticals’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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.