Herantis Pharma Oyj (HEL:HRTIS) Is About To Turn The Corner

With the business potentially at an important milestone, we thought we'd take a closer look at Herantis Pharma Oyj's (HEL:HRTIS) future prospects. Herantis Pharma Oyj, a drug development company, focuses on developing regenerative medicine. The €31m market-cap company announced a latest loss of €9.2m on 31 December 2020 for its most recent financial year result. As path to profitability is the topic on Herantis Pharma Oyj's investors mind, we've decided to gauge market sentiment. 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 Herantis Pharma Oyj

Expectations from some of the Finnish Pharmaceuticals analysts is that Herantis Pharma Oyj is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of €28m in 2021. The company is therefore projected to breakeven around 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 55%, 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.

Underlying developments driving Herantis Pharma Oyj's growth isn’t the focus of this broad overview, however, keep in mind that typically a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. 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 Herantis Pharma Oyj is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Herantis Pharma Oyj's case is 95%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Herantis Pharma Oyj which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Herantis Pharma Oyj, take a look at Herantis Pharma Oyj's company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:

1. Valuation: What is Herantis Pharma Oyj 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 Herantis Pharma Oyj 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 Herantis Pharma Oyj’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.

If you’re looking to trade Herantis Pharma Oyj, 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. Promoted

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 (at) simplywallst.com.