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RedHill Biopharma Ltd. (NASDAQ:RDHL): Is Breakeven Near?

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With the business potentially at an important milestone, we thought we'd take a closer look at RedHill Biopharma Ltd.'s (NASDAQ:RDHL) future prospects. RedHill Biopharma Ltd., a specialty biopharmaceutical company, primarily focuses on gastrointestinal and infectious diseases. The US$86m market-cap company announced a latest loss of US$98m on 31 December 2021 for its most recent financial year result. The most pressing concern for investors is RedHill Biopharma's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for RedHill Biopharma

RedHill Biopharma is bordering on breakeven, according to the 4 American Pharmaceuticals analysts. They expect the company to post a final loss in 2022, before turning a profit of US$13m in 2023. Therefore, the company is expected to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 62%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

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

Underlying developments driving RedHill Biopharma's growth isn’t the focus of this broad overview, but, take into account that typically pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. 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. RedHill Biopharma currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on RedHill Biopharma, so if you are interested in understanding the company at a deeper level, take a look at RedHill Biopharma's company page on Simply Wall St. We've also compiled a list of key aspects you should further examine:

  1. Valuation: What is RedHill Biopharma 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 RedHill Biopharma 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 RedHill Biopharma’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.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.