Cresco Labs Inc.'s (CSE:CL) Profit Outlook

Cresco Labs Inc. (CSE:CL) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Cresco Labs Inc., together with its subsidiaries, cultivates, manufactures, and sells retail and medical cannabis products in the United States. On 31 December 2023, the CA$1.2b market-cap company posted a loss of US$176m for its most recent financial year. Many investors are wondering about the rate at which Cresco Labs will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Cresco Labs

According to the 13 industry analysts covering Cresco Labs, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$97m in 2026. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 97% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Cresco Labs' upcoming projects, however, keep in mind that by and large 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 would like to bring into light with Cresco Labs is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Cresco Labs' case is 96%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

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

1. Historical Track Record: What has Cresco Labs' 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 Cresco Labs' 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.