Puma Biotechnology, Inc.’s (NASDAQ:PBYI) Shift From Loss To Profit

Puma Biotechnology, Inc.’s (NASDAQ:PBYI): Puma Biotechnology, Inc., a biopharmaceutical company, focuses on the development and commercialization of products to enhance cancer care. The US$409m market-cap posted a loss in its most recent financial year of US$75.6m and a latest trailing-twelve-month loss of US$82.4m leading to an even wider gap between loss and breakeven. Many investors are wondering the rate at which PBYI will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for PBYI’s growth and when analysts expect the company to become profitable.

See our latest analysis for Puma Biotechnology

Consensus from the 9 Biotechs analysts is PBYI is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$17m in 2022. Therefore, PBYI is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which PBYI must grow year-on-year. It turns out an average annual growth rate of 62% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, PBYI may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:PBYI Earnings Per Share Growth July 13th 2020

I’m not going to go through company-specific developments for PBYI given that this is a high-level summary, however, bear in mind 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 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 issue worth mentioning. PBYI currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in PBYI’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on PBYI, so if you are interested in understanding the company at a deeper level, take a look at PBYI’s company page on Simply Wall St. I’ve also put together a list of key aspects you should look at:

  1. Valuation: What is PBYI 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 PBYI 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 Puma Biotechnology’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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