Tilray, Inc.'s (NASDAQ:TLRY): Tilray, Inc. engages in the research, cultivation, processing, and distribution of medical cannabis. The US$3.1b market-cap posted a loss in its most recent financial year of -US$67.7m and a latest trailing-twelve-month loss of -US$115.1m leading to an even wider gap between loss and breakeven. Many investors are wondering the rate at which TLRY will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for TLRY.
According to the 16 industry analysts covering TLRY, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$37m in 2022. TLRY is therefore projected to breakeven around 3 years from now. What rate will TLRY 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 70%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for TLRY given that this is a high-level summary, however, keep in mind that typically pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
Before I wrap up, there’s one issue worth mentioning. TLRY currently has a debt-to-equity ratio of 118%. Typically, debt shouldn’t exceed 40% of your equity, and TLRY 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.
This article is not intended to be a comprehensive analysis on TLRY, so if you are interested in understanding the company at a deeper level, take a look at TLRY’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further examine:
- Valuation: What is TLRY 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 TLRY 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 Tilray’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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