WeedMD Inc. (CVE:WMD) On The Verge Of Breaking Even

We feel now is a pretty good time to analyse WeedMD Inc.'s (CVE:WMD) business as it appears the company may be on the cusp of a considerable accomplishment. WeedMD Inc. produces, distributes, and sells medical-grade cannabis in Canada. The CA$53m market-cap company posted a loss in its most recent financial year of CA$10m and a latest trailing-twelve-month loss of CA$16m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is WeedMD's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for WeedMD

Expectations from some of the Canadian Pharmaceuticals analysts is that WeedMD is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of CA$6.7m in 2021. So, the company is predicted to breakeven approximately 12 months 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 156% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of WeedMD's upcoming projects, but, bear in mind that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with WeedMD is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in WeedMD's case is 50%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of WeedMD to cover in one brief article, but the key fundamentals for the company can all be found in one place – WeedMD's company page on Simply Wall St. We've also compiled a list of relevant factors you should further examine:

1. Historical Track Record: What has WeedMD's 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 WeedMD's 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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