Analysts Expect Breakeven For The Hydropothecary Corporation (TSE:HEXO)

The Hydropothecary Corporation's (TSE:HEXO): The Hydropothecary Corporation, together with its subsidiaries, produces and distributes medical marijuana products. The CA$1.03b market-cap posted a loss in its most recent financial year of -CA$12.42m and a latest trailing-twelve-month loss of -CA$21.74m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on HEXO’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for HEXO.

According to the industry analysts covering HEXO, breakeven is near. They anticipate the company to incur a final loss in 2018, before generating positive profits of CA$5.55m in 2019. Therefore, HEXO is expected to breakeven roughly a few months from now. What rate will HEXO have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 141.86%, which signals high confidence from analysts. If this rate turns out to be too aggressive, HEXO may become profitable much later than analysts predict.

I’m not going to go through company-specific developments for HEXO given that this is a high-level summary, however, keep in mind that by and large 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 I’d like to point out is that HEXO has no debt on its balance sheet, which is rare for a loss-making pharma, which typically has high debt relative to its equity. HEXO 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 HEXO 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 HEXO, take a look at HEXO’s company page on Simply Wall St. I’ve also put together a list of essential aspects you should look at:

1. Valuation: What is HEXO 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 HEXO 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 Hydropothecary’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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.