Clovis Oncology Inc (NASDAQ:CLVS): Are Analysts Optimistic?

Clovis Oncology Inc's (NASDAQ:CLVS): Clovis Oncology, Inc., a biopharmaceutical company, focuses on acquiring, developing, and commercializing anti-cancer agents in the United States, Europe, and internationally. The US$2.40B market-cap company announced a latest loss of -US$346.40M on 31 December 2017 for its most recent financial year result. Many investors are wondering the rate at which CLVS will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for CLVS’s growth and when analysts expect the company to become profitable.

Expectation from analysts is CLVS is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$133.21M in 2020. Therefore, CLVS is expected to breakeven roughly 2 years from now. What rate will CLVS have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 62.70%, which signals high confidence from analysts. If this rate turns out to be too aggressive, CLVS may become profitable much later than analysts predict.

I’m not going to go through company-specific developments for CLVS given that this is a high-level summary, however, bear 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, 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. CLVS currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in CLVS’s case is 76.82%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on CLVS, so if you are interested in understanding the company at a deeper level, take a look at CLVS’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should further research:

1. Valuation: What is CLVS 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 CLVS 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 Clovis Oncology’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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.