Spectrum Pharmaceuticals, Inc.’s (NASDAQ:SPPI): Spectrum Pharmaceuticals, Inc. develops and commercializes oncology and hematology drug products. With the latest financial year loss of -US$91.2m and a trailing-twelve month of -US$99.3m, the US$1.2b market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is SPPI’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for SPPI.
According to the 4 industry analysts covering SPPI, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$79m in 2021. SPPI is therefore projected to breakeven around 3 years from today. What rate will SPPI have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 69%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of SPPI’s upcoming projects, but, keep in mind that generally biotechs, 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 I wrap up, there’s one aspect worth mentioning. SPPI has managed its capital prudently, with debt making up 12% of equity. This means that SPPI has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
There are key fundamentals of SPPI which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at SPPI, take a look at SPPI’s company page on Simply Wall St. I’ve also compiled a list of essential aspects you should further research:
- Valuation: What is SPPI 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 SPPI 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 Spectrum Pharmaceuticals’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.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.