Adamas Pharmaceuticals Inc’s (NASDAQ:ADMS): Adamas Pharmaceuticals, Inc. discovers, develops, and sells therapies for chronic neurologic disorders. With the latest financial year loss of -US$89m and a trailing-twelve month of -US$122m, the US$517m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is ADMS’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for ADMS’s growth and when analysts expect the company to become profitable.
Expectation from Biotechs analysts is ADMS is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$40m in 2021. Therefore, ADMS is expected to breakeven roughly a couple of months from now! How fast will ADMS have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 67% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for ADMS given that this is a high-level summary, however, keep in mind that by and large a biotech has lumpy cash flows which are contingent on the product type 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 I wrap up, there’s one issue worth mentioning. ADMS currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in ADMS’s case is 78%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are key fundamentals of ADMS which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at ADMS, take a look at ADMS’s company page on Simply Wall St. I’ve also put together a list of relevant aspects you should look at:
- Valuation: What is ADMS 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 ADMS is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Adamas Pharmaceuticals’s board and the CEO’s back ground.
- 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.