When Will Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) Become Profitable?
We feel now is a pretty good time to analyse Verrica Pharmaceuticals Inc.'s (NASDAQ:VRCA) business as it appears the company may be on the cusp of a considerable accomplishment. Verrica Pharmaceuticals Inc., a clinical-stage dermatology therapeutics company, develops medications for the treatment of skin diseases in the United States. On 31 December 2023, the US$235m market-cap company posted a loss of US$67m for its most recent financial year. The most pressing concern for investors is Verrica Pharmaceuticals' path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
See our latest analysis for Verrica Pharmaceuticals
According to the 5 industry analysts covering Verrica Pharmaceuticals, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$14m in 2026. The company is therefore projected to breakeven around 2 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 59%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Verrica Pharmaceuticals' growth isn’t the focus of this broad overview, however, bear in mind that by and large 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. Verrica Pharmaceuticals currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
Next Steps:
There are key fundamentals of Verrica Pharmaceuticals which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Verrica Pharmaceuticals, take a look at Verrica Pharmaceuticals' company page on Simply Wall St. We've also put together a list of key factors you should look at:
Valuation: What is Verrica Pharmaceuticals 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 Verrica Pharmaceuticals 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 Verrica Pharmaceuticals’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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
