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The Supreme Cannabis Company, Inc.'s (TSE:FIRE) About To Shift From Loss To Profit

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Simply Wall St
·3 min read
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With the business potentially at an important milestone, we thought we'd take a closer look at The Supreme Cannabis Company, Inc.'s (TSE:FIRE) future prospects. The Supreme Cannabis Company, Inc. engages in the production of medical cannabis products in Canada. With the latest financial year loss of CA$139m and a trailing-twelve-month loss of CA$93m, the CA$73m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Supreme Cannabis Company will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Supreme Cannabis Company

According to the 4 industry analysts covering Supreme Cannabis Company, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of CA$16m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 91% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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

Given this is a high-level overview, we won’t go into details of Supreme Cannabis Company's upcoming projects, but, keep in mind that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Supreme Cannabis Company currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Supreme Cannabis Company's case is 41%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Supreme Cannabis Company to cover in one brief article, but the key fundamentals for the company can all be found in one place – Supreme Cannabis Company's company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

  1. Historical Track Record: What has Supreme Cannabis Company's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Supreme Cannabis Company'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.

This article by Simply Wall St is general in nature. 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.

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