Starpharma Holdings Limited (ASX:SPL): Is Breakeven Near?

With the business potentially at an important milestone, we thought we'd take a closer look at Starpharma Holdings Limited's (ASX:SPL) future prospects. 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$15m and a trailing-twelve-month loss of AU$19m, the AU$652m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Starpharma 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.

See our latest analysis for Starpharma Holdings

According to some industry analysts covering Starpharma Holdings, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$17m in 2022. Therefore, the company is expected to breakeven just over a year from now. 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 71%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Starpharma Holdings given that this is a high-level summary, but, take into account 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 we’d like to point out is that Starpharma Holdings 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 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:

There are too many aspects of Starpharma Holdings to cover in one brief article, but the key fundamentals for the company can all be found in one place – Starpharma Holdings' company page on Simply Wall St. We've also compiled a list of key factors you should further examine:

1. Valuation: What is Starpharma Holdings 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 Starpharma Holdings 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 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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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.
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