Loss-Making Althea Group Holdings Limited (ASX:AGH) Expected To Breakeven In The Medium-Term

By
Simply Wall St
Published
September 01, 2021
ASX:AGH
Source: Shutterstock

We feel now is a pretty good time to analyse Althea Group Holdings Limited's (ASX:AGH) business as it appears the company may be on the cusp of a considerable accomplishment. Althea Group Holdings Limited cultivates, produces, supplies, imports, and exports pharmaceutical grade medicinal cannabis in Australia, the United Kingdom, and Canada. The AU$75m market-cap company announced a latest loss of AU$15m on 30 June 2021 for its most recent financial year result. Many investors are wondering about the rate at which Althea Group Holdings will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Althea Group Holdings

Althea Group Holdings is bordering on breakeven, according to some Australian Pharmaceuticals analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$5.0m in 2023. So, the company is predicted to breakeven approximately 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 121% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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ASX:AGH Earnings Per Share Growth September 1st 2021

Given this is a high-level overview, we won’t go into details of Althea Group Holdings' upcoming projects, though, take into account that generally 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 we’d like to point out is that Althea Group Holdings has no debt on its balance sheet, which is rare for a loss-making pharma, which typically has high debt relative to its equity. This means that the company 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 Althea Group Holdings, so if you are interested in understanding the company at a deeper level, take a look at Althea Group Holdings' company page on Simply Wall St. We've also put together a list of key aspects you should look at:

  1. Historical Track Record: What has Althea Group Holdings' performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Althea Group Holdings' board and the CEO’s background.
  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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