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We Might See A Profit From Inotiv, Inc. (NASDAQ:NOTV) Soon

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·3 min read
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With the business potentially at an important milestone, we thought we'd take a closer look at Inotiv, Inc.'s (NASDAQ:NOTV) future prospects. Inotiv, Inc. provides drug discovery and development services to the pharmaceutical, chemical, and medical device industries; and sells analytical instruments to the pharmaceutical development and contract research industries. The US$373m market-cap company posted a loss in its most recent financial year of US$4.7m and a latest trailing-twelve-month loss of US$3.8m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Inotiv will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Inotiv

Inotiv is bordering on breakeven, according to some American Life Sciences analysts. They expect the company to post a final loss in 2020, before turning a profit of US$354k in 2021. So, the company is predicted to breakeven approximately a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 72%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Inotiv given that this is a high-level summary, though, keep in mind that typically a life science company has lumpy cash flows which are contingent on the product and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. Inotiv currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Inotiv 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 Inotiv, take a look at Inotiv's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further research:

  1. Historical Track Record: What has Inotiv's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Inotiv's board and the CEO’s background.

  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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.