Akorn, Inc.’s (NASDAQ:AKRX) Path To Profitability

Akorn, Inc.’s (NASDAQ:AKRX): Akorn, Inc., a specialty pharmaceutical company, develops, manufactures, and markets generic and branded prescription pharmaceuticals, over-the-counter (OTC) consumer health products, and animal health pharmaceuticals in the United States and internationally. On 31 December 2019, the US$68m market-cap posted a loss of -US$226.8m for its most recent financial year. As path to profitability is the topic on AKRX’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for AKRX.

See our latest analysis for Akorn

According to the 5 industry analysts covering AKRX, the consensus is breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$5.3m in 2022. Therefore, AKRX is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which AKRX must grow year-on-year. It turns out an average annual growth rate of 89% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:AKRX Past and Future Earnings, March 21st 2020
NasdaqGS:AKRX Past and Future Earnings, March 21st 2020

Underlying developments driving AKRX’s growth isn’t the focus of this broad overview, though, bear in mind that typically pharmaceuticals, 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 I wrap up, there’s one issue worth mentioning. AKRX currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in AKRX’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of AKRX 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 AKRX, take a look at AKRX’s company page on Simply Wall St. I’ve also put together a list of important factors you should further research:

  1. Historical Track Record: What has AKRX’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 Akorn’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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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