Planet 13 Holdings Inc.'s (CSE:PLTH) Has Found A Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Planet 13 Holdings Inc.'s (CSE:PLTH) future prospects. Planet 13 Holdings Inc., a cannabis company, cultivates, produces, distributes, and markets cannabis and cannabis-infused and related products for medical and retail cannabis markets in Nevada, the United States. On 31 December 2020, the CA$1.7b market-cap company posted a loss of US$7.9m for its most recent financial year. Many investors are wondering about the rate at which Planet 13 Holdings will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Planet 13 Holdings

Consensus from 3 of the Canadian Pharmaceuticals analysts is that Planet 13 Holdings is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$13m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 115%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Planet 13 Holdings' growth isn’t the focus of this broad overview, however, bear in mind that generally pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 0.7% 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 Planet 13 Holdings, so if you are interested in understanding the company at a deeper level, take a look at Planet 13 Holdings' company page on Simply Wall St. We've also put together a list of key aspects you should further examine:

1. Historical Track Record: What has Planet 13 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 Planet 13 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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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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