Ardelyx, Inc.'s (NASDAQ:ARDX) Path To Profitability

Ardelyx, Inc. (NASDAQ:ARDX) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Ardelyx, Inc. discovers, develops, and commercializes medicines to treat unmet medical needs in the United States and internationally. With the latest financial year loss of US$39m and a trailing-twelve-month loss of US$57m, the US$1.4b market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is Ardelyx's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

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Consensus from 11 of the American Biotechs analysts is that Ardelyx is on the verge of breakeven. They expect the company to post a final loss in 2025, before turning a profit of US$29m in 2026. So, the company is predicted to breakeven just over a year from now. 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 66% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Ardelyx's growth isn’t the focus of this broad overview, but, take into account that typically biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

View our latest analysis for Ardelyx

Before we wrap up, there’s one issue worth mentioning. Ardelyx currently has a debt-to-equity ratio of 150%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Ardelyx, so if you are interested in understanding the company at a deeper level, take a look at Ardelyx's company page on Simply Wall St. We've also put together a list of essential factors you should further research:

1. Valuation: What is Ardelyx 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 Ardelyx is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Ardelyx’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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.