When Can We Expect A Profit From Starpharma Holdings Limited (ASX:SPL)?

Starpharma Holdings Limited's (ASX:SPL): Starpharma Holdings Limited engages in the research, development, and commercialization of dendrimer products for pharmaceutical, life-science, and other applications worldwide. With the latest financial year loss of -AU$14.3m and a trailing-twelve month of -AU$12.9m, the AU$361m market-cap alleviates its loss by moving closer towards its target of breakeven. As path to profitability is the topic on SPL’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for SPL, its year of breakeven and its implied growth rate.

Check out our latest analysis for Starpharma Holdings

Consensus from the 3 Pharmaceuticals analysts is SPL is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of AU$22m in 2022. So, SPL is predicted to breakeven approximately 2 years from today. How fast will SPL have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 79% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, SPL may become profitable much later than analysts predict.

Underlying developments driving SPL’s growth isn’t the focus of this broad overview, but, bear 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.

One thing I’d like to point out is that SPL has no debt on its balance sheet, which is quite unusual for a cash-burning pharma, which usually has a high level of debt relative to its equity. This means that SPL has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is SPL 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 SPL 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 Starpharma Holdings’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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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. Thank you for reading.