Stock Analysis

Pacific Edge Limited's (NZSE:PEB) Profit Outlook

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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. The NZ$820m market-cap company posted a loss in its most recent financial year of NZ$19m and a latest trailing-twelve-month loss of NZ$17m shrinking the gap between loss and breakeven. The most pressing concern for investors is Pacific Edge'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.

Check out our latest analysis for Pacific Edge

Pacific Edge is bordering on breakeven, according to the 3 New Zealander Biotechs analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of NZ$1.8m in 2022. The company is therefore projected to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 113% 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.

earnings-per-share-growth
NZSE:PEB Earnings Per Share Growth January 19th 2021

Given this is a high-level overview, we won’t go into details of Pacific Edge's upcoming projects, however, keep in mind that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that 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:

This article is not intended to be a comprehensive analysis on Pacific Edge, so if you are interested in understanding the company at a deeper level, take a look at Pacific Edge's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:

  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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