Starpharma Holdings Limited (ASX:SPL) Is Expected To Breakeven In The Near Future

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. On 30 June 2020, the AU$579m market-cap company posted a loss of AU$15m for its most recent financial year. As path to profitability is the topic on Starpharma Holdings' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Starpharma Holdings

Consensus from 2 of the Australian Pharmaceuticals analysts is that Starpharma Holdings is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$7.6m in 2022. The company is therefore projected to breakeven just over a year 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 71% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Starpharma Holdings given that this is a high-level summary, however, 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 we wrap up, there’s one aspect worth mentioning. Starpharma Holdings currently 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:

There are key fundamentals of Starpharma 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 Starpharma Holdings, take a look at Starpharma Holdings' company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

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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