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We feel now is a pretty good time to analyse Cann Group Limited's (ASX:CAN) business as it appears the company may be on the cusp of a considerable accomplishment. Cann Group Limited engages in research and development, cultivation and production, manufacturing, clinical evaluation, processing, packaging, and distribution and supply of medicinal cannabis for various diseases and medical conditions in Australia. The AU$189m market-cap company posted a loss in its most recent financial year of AU$17m and a latest trailing-twelve-month loss of AU$18m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Cann Group will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to some industry analysts covering Cann Group, breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of AU$9.0m in 2024. So, the company is predicted to breakeven approximately 3 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 69% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Cann Group's growth isn’t the focus of this broad overview, though, bear in mind that typically pharmaceuticals, 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 we wrap up, there’s one aspect worth mentioning. Cann Group currently has no debt on its balance sheet, which is quite unusual for a cash-burning pharma, which usually has a high level of debt relative to its equity. This means that the company 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.
There are key fundamentals of Cann Group which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Cann Group, take a look at Cann Group's company page on Simply Wall St. We've also put together a list of essential aspects you should look at:
Valuation: What is Cann Group 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 Cann Group 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 Cann Group’s board and the CEO’s background.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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