Breakeven On The Horizon For PhotoCure ASA (OB:PHO)

PhotoCure ASA's (OB:PHO): Photocure ASA, a specialty pharmaceutical company, engages in the research, development, production, distribution, marketing, and sale of pharmaceutical products and related technical medical equipment in Norway, Sweden, Denmark, Finland, and the United States. On 31 December 2017, the ØRE626.23M market-cap posted a loss of -ØRE34.70M for its most recent financial year. As path to profitability is the topic on PHO’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for PHO.

According to the industry analysts covering PHO, breakeven is near. They anticipate the company to incur a final loss in 2017, before generating positive profits of ØRE3.08M in 2018. So, PHO is predicted to breakeven approximately a couple of months from now! In order to meet this breakeven date, I calculated the rate at which PHO must grow year-on-year. It turns out an average annual growth rate of 94.76% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, I won’t go into detail the detail of PHO’s upcoming projects, 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.

Before I wrap up, there’s one aspect worth mentioning. PHO currently has no debt on its balance sheet, which is quite unusual for a cash-burning pharma, which usually has a high level of debt relative to its equity. This means that PHO has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on PHO, so if you are interested in understanding the company at a deeper level, take a look at PHO’s company page on Simply Wall St. I’ve also put together a list of important factors you should further examine:

1. Valuation: What is PHO 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 PHO 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 PhotoCure’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.