Stock Analysis

Pacific Edge Limited (NZSE:PEB): Are Analysts Optimistic?

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NZSE:PEB
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We feel now is a pretty good time to analyse Pacific Edge Limited's (NZSE:PEB) business as it appears the company may be on the cusp of a considerable accomplishment. Pacific Edge Limited, a cancer diagnostic company, researches, develops, and commercializes diagnostic and prognostic tools for the early detection and management of cancers in New Zealand, the United States, and internationally. With the latest financial year loss of NZ$19m and a trailing-twelve-month loss of NZ$17m, the NZ$822m market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on Pacific Edge'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.

View our latest analysis for Pacific Edge

Pacific Edge is bordering on breakeven, according to the 3 New Zealander Biotechs analysts. They expect the company to post a final loss in 2022, before turning a profit of NZ$12m in 2023. So, the company is predicted to breakeven approximately 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 101% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NZSE:PEB Earnings Per Share Growth May 14th 2021

Given this is a high-level overview, we won’t go into details of Pacific Edge's upcoming projects, though, bear in mind that typically biotechs, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 2.6% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Pacific Edge 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 Pacific Edge, take a look at Pacific Edge's company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

  1. Historical Track Record: What has Pacific Edge'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 Pacific Edge'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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