When Can We Expect A Profit From Sarepta Therapeutics, Inc. (NASDAQ:SRPT)?
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Sarepta Therapeutics, Inc.'s (NASDAQ:SRPT): Sarepta Therapeutics, Inc. focuses on the discovery and development of RNA-based therapeutics, gene therapy, and other genetic medicine approaches for the treatment of rare diseases. The US$8.5b market-cap company announced a latest loss of -US$361.9m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on SRPT’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for SRPT.
View our latest analysis for Sarepta Therapeutics
Consensus from the 21 Biotechs analysts is SRPT is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$286m in 2021. So, SRPT is predicted to breakeven approximately 2 years from now. What rate will SRPT 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 55%, which signals high confidence from analysts. If this rate turns out to be too aggressive, SRPT may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for SRPT given that this is a high-level summary, though, 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 SRPT is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in SRPT’s case is 41%. 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 SRPT, so if you are interested in understanding the company at a deeper level, take a look at SRPT’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should look at:
Valuation: What is SRPT 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 SRPT 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 Sarepta Therapeutics’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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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.
