Loss-Making Eton Pharmaceuticals, Inc. (NASDAQ:ETON) Set To Breakeven

We feel now is a pretty good time to analyse Eton Pharmaceuticals, Inc.'s (NASDAQ:ETON) business as it appears the company may be on the cusp of a considerable accomplishment. Eton Pharmaceuticals, Inc., a pharmaceutical company, focuses on developing and commercializing treatments for rare diseases. The company’s loss has recently broadened since it announced a US$3.8m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$4.1m, moving it further away from breakeven. The most pressing concern for investors is Eton Pharmaceuticals' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

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Eton Pharmaceuticals is bordering on breakeven, according to the 3 American Pharmaceuticals analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$4.6m in 2025. The company is therefore projected to breakeven around 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 51% is expected, which signals high confidence from analysts. 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 Eton Pharmaceuticals' upcoming projects, however, bear in mind that typically 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.

View our latest analysis for Eton Pharmaceuticals

Before we wrap up, there’s one issue worth mentioning. Eton Pharmaceuticals currently has a debt-to-equity ratio of 126%. 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:

There are too many aspects of Eton Pharmaceuticals to cover in one brief article, but the key fundamentals for the company can all be found in one place – 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. 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.