With the business potentially at an important milestone, we thought we'd take a closer look at Decibel Cannabis Company Inc.'s (CVE:DB) future prospects. Decibel Cannabis Company Inc. engages in the cultivation, processing, production, and retail sale of cannabis products in Canada. The CA$114m market-cap company’s loss lessened since it announced a CA$9.2m loss in the full financial year, compared to the latest trailing-twelve-month loss of CA$3.2m, as it approaches breakeven. Many investors are wondering about the rate at which Decibel Cannabis 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.
According to some industry analysts covering Decibel Cannabis, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of CA$3.4m in 2021. The company is therefore projected to breakeven around a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 120% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Decibel Cannabis given that this is a high-level summary, but, keep 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.
One thing we would like to bring into light with Decibel Cannabis is its debt-to-equity ratio of 110%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Decibel Cannabis, so if you are interested in understanding the company at a deeper level, take a look at Decibel Cannabis' company page on Simply Wall St. We've also compiled a list of essential factors you should further research:
- Historical Track Record: What has Decibel Cannabis' 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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Decibel Cannabis' board and the CEO’s background.
- 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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