Pharma Mar, S.A.'s (BME:PHM): Pharma Mar, S.A., a biopharmaceutical company, engages in the discovery and development of marine-derived anticancer drugs in Spain and internationally. The €434m market-cap company announced a latest loss of -€16.2m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on PHM’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for PHM’s growth and when analysts expect the company to become profitable.
PHM is bordering on breakeven, according to the 2 Biotechs analysts. They anticipate the company to incur a final loss in 2019, before generating positive profits of €27m in 2020. Therefore, PHM is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which PHM must grow year-on-year. It turns out an average annual growth rate of 22% is expected, which is rather optimistic! If this rate turns out to be too aggressive, PHM may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of PHM’s upcoming projects, however, keep in mind that generally 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 issue worth mentioning. PHM currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in PHM’s case, it has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of PHM to cover in one brief article, but the key fundamentals for the company can all be found in one place – PHM’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should look at:
- Valuation: What is PHM 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 PHM 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 Pharma Mar’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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