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SalvaRx Group plc (LON:SALV): Are Analysts Optimistic?

Matthew Smith

SalvaRx Group plc’s (AIM:SALV): SalvaRx Group plc discovers and develops immune-oncology drugs. The UK£7.75M market-cap company’s loss lessens since it announced a -UK£2.04M bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -UK£1.86M, as it approaches breakeven. As path to profitability is the topic on SALV’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for SALV.

Check out our latest analysis for SalvaRx Group

Expectation from analysts is SALV is on the verge of breakeven. They expect the company to post a final loss in 2018, before turning a profit of UK£29.98M in 2019. Therefore, SALV is expected to breakeven roughly a couple of months from now! In order to meet this breakeven date, I calculated the rate at which SALV must grow year-on-year. It turns out an average annual growth rate of 131.31% is expected, which is rather optimistic! If this rate turns out to be too aggressive, SALV may become profitable much later than analysts predict.

AIM:SALV Past Future Earnings Feb 28th 18
AIM:SALV Past Future Earnings Feb 28th 18

Underlying developments driving SALV’s growth isn’t the focus of this broad overview, though, bear in mind that generally 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. SALV currently has a debt-to-equity ratio of 103.46%. Typically, debt shouldn’t exceed 40% of your equity, and SALV has considerably exceeded this. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on SALV, so if you are interested in understanding the company at a deeper level, take a look at SALV’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should further examine:

  1. Valuation: What is SALV 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 SALV 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 SalvaRx Group’s board and the CEO’s back ground.

  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.

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.