ECS Botanics Holdings Ltd's (ASX:ECS) Profit Outlook

By
Simply Wall St
Published
September 16, 2021
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, an agribusiness and hemp food company, cultivates and processes industrial hemp in Australia. The AU$39m market-cap company announced a latest loss of AU$4.3m on 30 June 2021 for its most recent financial year result. The most pressing concern for investors is ECS Botanics Holdings' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for ECS Botanics Holdings

ECS Botanics Holdings is bordering on breakeven, according to some Australian Pharmaceuticals analysts. They expect the company to post a final loss in 2023, before turning a profit of AU$3.2m in 2024. Therefore, the company is expected to breakeven roughly 3 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 104%, which is rather optimistic! 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 September 16th 2021

Given this is a high-level overview, we won’t go into details of ECS Botanics Holdings' upcoming projects, however, 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that The company has managed its capital prudently, 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:

There are key fundamentals of ECS Botanics Holdings which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at ECS Botanics Holdings, take a look at ECS Botanics Holdings' company page on Simply Wall St. We've also put together a list of pertinent factors 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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