Amarin Corporation plc’s (NASDAQ:AMRN): Amarin Corporation plc, a pharmaceutical company, engages in the development and commercialization of therapeutics for the treatment of cardiovascular diseases in the United States. On 31 December 2018, the US$6.0b market-cap posted a loss of -US$116.4m for its most recent financial year. Many investors are wondering the rate at which AMRN will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for AMRN’s growth and when analysts expect the company to become profitable.
Consensus from the 4 Pharmaceuticals analysts is AMRN is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$84m in 2020. Therefore, AMRN is expected to breakeven roughly a couple of months from now! In order to meet this breakeven date, I calculated the rate at which AMRN must grow year-on-year. It turns out an average annual growth rate of 59% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of AMRN’s upcoming projects, but, keep in mind that generally pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
Before I wrap up, there’s one issue worth mentioning. AMRN currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in AMRN’s case is 53%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on AMRN, so if you are interested in understanding the company at a deeper level, take a look at AMRN’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should further research:
- Valuation: What is AMRN 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 AMRN 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 Amarin’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.
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