Ardelyx, Inc.’s (NASDAQ:ARDX) Shift From Loss To Profit

Ardelyx, Inc.’s (NASDAQ:ARDX): Ardelyx, Inc., a biopharmaceutical company, develops and sells medicines for the treatment of cardiorenal diseases in the United States and internationally. The US$515m market-cap posted a loss in its most recent financial year of US$94.9m and a latest trailing-twelve-month loss of US$90.7m shrinking the gap between loss and breakeven. As path to profitability is the topic on ARDX’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for ARDX, its year of breakeven and its implied growth rate.

See our latest analysis for Ardelyx

According to the 4 industry analysts covering ARDX, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$98m in 2023. Therefore, ARDX is expected to breakeven roughly 3 years from now. What rate will ARDX 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 79%, which signals high confidence from analysts. If this rate turns out to be too aggressive, ARDX may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGM:ARDX Earnings Per Share Growth August 10th 2020

I’m not going to go through company-specific developments for ARDX given that this is a high-level summary, but, bear in mind that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. 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. ARDX has managed its capital prudently, with debt making up 34% of equity. This means that ARDX 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:

There are key fundamentals of ARDX 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 ARDX, take a look at ARDX’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further examine:

  1. Valuation: What is ARDX 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 ARDX is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Ardelyx’s board and the CEO’s back ground.
  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.

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