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Market Sentiment Around Loss-Making Proteostasis Therapeutics, Inc. (NASDAQ:PTI)

Simply Wall St

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Proteostasis Therapeutics, Inc.'s (NASDAQ:PTI): Proteostasis Therapeutics, Inc., a clinical stage biopharmaceutical company, discovers and develops novel therapeutics to treat cystic fibrosis (CF) and other diseases caused by an imbalance in the proteostasis network. On 31 December 2018, the US$54m market-cap posted a loss of -US$61.8m for its most recent financial year. Many investors are wondering the rate at which PTI will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for PTI, its year of breakeven and its implied growth rate.

Check out our latest analysis for Proteostasis Therapeutics

Consensus from the 3 Biotechs analysts is PTI is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$91m in 2021. Therefore, PTI is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, I calculated the rate at which PTI must grow year-on-year. It turns out an average annual growth rate of 41% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGM:PTI Past and Future Earnings, May 2nd 2019

Given this is a high-level overview, I won’t go into details of PTI’s upcoming projects, but, keep 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.

One thing I’d like to point out is that PTI has managed its capital prudently, with debt making up 12% of equity. This means that PTI has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of PTI to cover in one brief article, but the key fundamentals for the company can all be found in one place – PTI’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should further research:

  1. Valuation: What is PTI 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 PTI 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 Proteostasis Therapeutics’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.