Eton Pharmaceuticals, Inc.'s (NASDAQ:ETON) Shift From Loss To Profit

Eton Pharmaceuticals, Inc. (NASDAQ:ETON) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Eton Pharmaceuticals, Inc., a specialty pharmaceutical company, focuses on developing and commercializing pharmaceutical products. The company’s loss has recently broadened since it announced a US$18m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$23m, moving it further away from breakeven. The most pressing concern for investors is Eton Pharmaceuticals' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Eton Pharmaceuticals

Eton Pharmaceuticals is bordering on breakeven, according to the 2 American Pharmaceuticals analysts. They expect the company to post a final loss in 2022, before turning a profit of US$12m in 2023. The company is therefore projected to breakeven around 2 years 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 76% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Eton Pharmaceuticals' growth isn’t the focus of this broad overview, however, bear 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 we wrap up, there’s one issue worth mentioning. Eton Pharmaceuticals 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 key fundamentals of Eton Pharmaceuticals which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Eton Pharmaceuticals, take a look at Eton Pharmaceuticals' company page on Simply Wall St. We've also compiled a list of important aspects you should further examine:

1. Valuation: What is Eton Pharmaceuticals 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 Eton Pharmaceuticals 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 Eton Pharmaceuticals’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. 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.
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