Recro Pharma, Inc.'s (NASDAQ:REPH): Recro Pharma, Inc. operates as a specialty pharmaceutical company. With the latest financial year loss of -US$79.7m and a trailing-twelve month of -US$59.4m, the US$273m market-cap alleviates its loss by moving closer towards its target of breakeven. As path to profitability is the topic on REPH’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for REPH, its year of breakeven and its implied growth rate.
According to the 5 industry analysts covering REPH, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$4.7m in 2020. Therefore, REPH is expected to breakeven roughly a couple of months from now! In order to meet this breakeven date, I calculated the rate at which REPH must grow year-on-year. It turns out an average annual growth rate of 56% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving REPH’s growth isn’t the focus of this broad overview, however, bear 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. 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. REPH currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.
There are too many aspects of REPH to cover in one brief article, but the key fundamentals for the company can all be found in one place – REPH’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should look at:
- Valuation: What is REPH 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 REPH 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 Recro Pharma’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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