Avid Bioservices Inc’s (NASDAQ:CDMO): Avid Bioservices, Inc. operates as a contract development and manufacturing organization focusing on the development and cGMP manufacture of biopharmaceutical products derived from mammalian cell culture. The US$183.88M market-cap posted a loss in its most recent financial year of -US$32.80M and a latest trailing-twelve-month loss of -US$46.99M leading to an even wider gap between loss and breakeven. The most pressing concern for investors is CDMO’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for CDMO, its year of breakeven and its implied growth rate.
According to the industry analysts covering CDMO, breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$10.70M in 2020. CDMO is therefore projected to breakeven around 2 years from now. What rate will CDMO 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 59.05%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for CDMO given that this is a high-level summary, however, keep in mind that by and large 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 aspect worth mentioning. CDMO currently has no debt on its balance sheet, which is rare for a loss-making biotech, which usually has a high level of debt relative to its equity. CDMO currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
There are key fundamentals of CDMO which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at CDMO, take a look at CDMO’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should look at:
- Valuation: What is CDMO 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 CDMO 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 Avid Bioservices’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 pass 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.