ECS Botanics Holdings Ltd's (ASX:ECS) Path To Profitability

By
Simply Wall St
Published
January 14, 2022
ASX:ECS
Source: Shutterstock

ECS Botanics Holdings Ltd (ASX:ECS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. ECS Botanics Holdings Ltd engages in the cultivation, manufacture, and sale of medicinal cannabis products. On 30 June 2021, the AU$36m market-cap company posted a loss of AU$4.3m for its most recent financial year. The most pressing concern for investors is ECS Botanics Holdings' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for ECS Botanics Holdings

ECS Botanics Holdings is bordering on breakeven, according to some Australian Pharmaceuticals analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$3.2m in 2024. The company is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 104% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
ASX:ECS Earnings Per Share Growth January 14th 2022

We're not going to go through company-specific developments for ECS Botanics Holdings given that this is a high-level summary, though, bear in mind 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 that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 0.008% of equity. This means that it 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:

This article is not intended to be a comprehensive analysis on ECS Botanics Holdings, so if you are interested in understanding the company at a deeper level, take a look at ECS Botanics Holdings' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:

  1. Historical Track Record: What has ECS Botanics 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 ECS Botanics 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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