Verastem, Inc.'s (NASDAQ:VSTM) Shift From Loss To Profit
With the business potentially at an important milestone, we thought we'd take a closer look at Verastem, Inc.'s (NASDAQ:VSTM) future prospects. Verastem, Inc., a development-stage biopharmaceutical company, focusing on developing and commercializing medicines to enhance the life of cancer patients. The US$481m market-cap company posted a loss in its most recent financial year of US$68m and a latest trailing-twelve-month loss of US$45m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Verastem will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
See our latest analysis for Verastem
Consensus from 2 of the American Biotechs analysts is that Verastem is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$21m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 66% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Verastem's growth isn’t the focus of this broad overview, however, take into account that by and large a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 19% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Verastem, so if you are interested in understanding the company at a deeper level, take a look at Verastem's company page on Simply Wall St. We've also put together a list of key factors you should further research:
Valuation: What is Verastem 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 Verastem 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 Verastem’s board and the CEO’s background.
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.
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