Evoke Pharma Inc’s (NASDAQ:EVOK) Path To Profitability

Evoke Pharma Inc’s (NASDAQ:EVOK): Evoke Pharma, Inc., a specialty pharmaceutical company, primarily focuses on the development of drugs for the treatment of gastroenterological disorders and diseases. With the latest financial year loss of -US$12.23m and a trailing-twelve month of -US$9.16m, the US$43.45m market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is EVOK’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for EVOK, its year of breakeven and its implied growth rate.

View out our latest analysis for Evoke Pharma

Expectation from Pharmaceuticals analysts is EVOK is on the verge of breakeven. They expect the company to post a final loss in 2019, before turning a profit of US$12.79m in 2020. So, EVOK is predicted to breakeven approximately a few months from now. In order to meet this breakeven date, I calculated the rate at which EVOK must grow year-on-year. It turns out an average annual growth rate of 66.10% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqCM:EVOK Past Future Earnings June 26th 18
NasdaqCM:EVOK Past Future Earnings June 26th 18

I’m not going to go through company-specific developments for EVOK given that this is a high-level summary, though, bear in mind that by and large a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one aspect worth mentioning. EVOK currently has no debt on its balance sheet, which is quite unusual for a cash-burning pharma, which typically has high debt relative to its equity. This means that EVOK has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of EVOK which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at EVOK, take a look at EVOK’s company page on Simply Wall St. I’ve also put together a list of important factors you should further research:

  1. Historical Track Record: What has EVOK’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Evoke Pharma’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.