Axsome Therapeutics, Inc.'s (NASDAQ:AXSM) Shift From Loss To Profit

We feel now is a pretty good time to analyse Axsome Therapeutics, Inc.'s (NASDAQ:AXSM) business as it appears the company may be on the cusp of a considerable accomplishment. Axsome Therapeutics, Inc., a biopharmaceutical company, develops and delivers novel therapies for the management of central nervous system (CNS) disorders in the United States. The US$5.5b market-cap company posted a loss in its most recent financial year of US$287m and a latest trailing-twelve-month loss of US$278m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Axsome Therapeutics will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

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According to the 19 industry analysts covering Axsome Therapeutics, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$62m in 2026. So, the company is predicted to breakeven just over a year from today. 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 63% 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.

Given this is a high-level overview, we won’t go into details of Axsome Therapeutics' upcoming projects, but, keep in mind that generally 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.

See our latest analysis for Axsome Therapeutics

Before we wrap up, there’s one issue worth mentioning. Axsome Therapeutics 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 this case, the company 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 too many aspects of Axsome Therapeutics to cover in one brief article, but the key fundamentals for the company can all be found in one place – Axsome Therapeutics' company page on Simply Wall St. We've also put together a list of key factors you should look at:

1. Valuation: What is Axsome Therapeutics 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 Axsome Therapeutics 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 Axsome Therapeutics’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.