When Will Emblem Corp (CVE:EMC) Become Profitable?

Emblem Corp’s (CVE:EMC): Emblem Corp. produces, distributes, and sells medical cannabis and cannabis derivatives in Canada. The company’s loss has recently broadened since it announced a -CA$12.1m loss in the full financial year, compared to the latest trailing-twelve-month loss of -CA$23.3m, moving it further away from breakeven. Many investors are wondering the rate at which EMC will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for EMC, its year of breakeven and its implied growth rate.

Check out our latest analysis for Emblem

According to the 3 industry analysts covering EMC, the consensus is breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of CA$27m in 2020. So, EMC is predicted to breakeven approximately 2 years from today. What rate will EMC 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 124%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

TSXV:EMC Past Future Earnings November 22nd 18
TSXV:EMC Past Future Earnings November 22nd 18

Underlying developments driving EMC’s growth isn’t the focus of this broad overview, though, take into account that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one aspect worth mentioning. EMC has managed its capital judiciously, with debt making up 30% of equity. This means that EMC 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 EMC 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 EMC, take a look at EMC’s company page on Simply Wall St. I’ve also put together a list of important factors you should further examine:

  1. Valuation: What is EMC 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 EMC 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 Emblem’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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.