Spectral Medical Inc.’s (TSE:EDT) Shift From Loss To Profit

Spectral Medical Inc.’s (TSE:EDT): Spectral Medical Inc. focuses on the development and commercialization of treatment for septic shock in North America. The company’s loss has recently broadened since it announced a CA$4.9m loss in the full financial year, compared to the latest trailing-twelve-month loss of CA$7.3m, moving it further away from breakeven. Many investors are wondering the rate at which EDT will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for EDT’s growth and when analysts expect the company to become profitable.

View our latest analysis for Spectral Medical

According to the industry analysts covering EDT, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of CA$34m in 2022. Therefore, EDT is expected to breakeven roughly 2 years from today. How fast will EDT have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 98% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, EDT may become profitable much later than analysts predict.

earnings-per-share-growth
TSX:EDT Earnings Per Share Growth August 2nd 2020

Given this is a high-level overview, I won’t go into details of EDT’s upcoming projects, however, keep in mind that by and large a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one aspect worth mentioning. EDT currently has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which typically has high debt relative to its equity. EDT currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of EDT which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at EDT, take a look at EDT’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further examine:

  1. Valuation: What is EDT 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 EDT 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 Spectral Medical’s board and the CEO’s back ground.
  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.

Promoted
If you’re looking to trade Spectral Medical, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.


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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.