Schrödinger, Inc. (NASDAQ:SDGR): Are Analysts Optimistic?

We feel now is a pretty good time to analyse Schrödinger, Inc.'s (NASDAQ:SDGR) business as it appears the company may be on the cusp of a considerable accomplishment. Schrödinger, Inc. provides computational platform to accelerate drug discovery and materials design for biopharmaceutical and industrial companies, academic institutions, and government laboratories worldwide. The US$7.1b market-cap company’s loss lessened since it announced a US$25m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$20m, as it approaches breakeven. Many investors are wondering about the rate at which Schrödinger will turn a profit, with the big question being “when will the company breakeven?” 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 Schrödinger

According to the 4 industry analysts covering Schrödinger, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$28m in 2022. The company is therefore projected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 58%, which is rather optimistic! 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 Schrödinger's upcoming projects, however, keep in mind that by and large a healthcare tech company has lumpy cash flows which are contingent on the product and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one aspect worth mentioning. Schrödinger currently has no debt on its balance sheet, which is rare for a loss-making healthcare tech company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of Schrödinger 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 Schrödinger, take a look at Schrödinger's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:

1. Historical Track Record: What has Schrödinger'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 Schrödinger'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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