Evoke Pharma, Inc.'s (NASDAQ:EVOK) Shift From Loss To Profit

By
Simply Wall St
Published
March 13, 2021
NasdaqCM:EVOK
Source: Shutterstock

Evoke Pharma, Inc. (NASDAQ:EVOK) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Evoke Pharma, Inc., a specialty pharmaceutical company, primarily focuses on the development of drugs for the treatment of gastroenterological disorders and diseases. The US$79m market-cap company announced a latest loss of US$13m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Evoke Pharma will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Evoke Pharma

According to some industry analysts covering Evoke Pharma, breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$10m in 2023. The company is therefore projected to breakeven around 2 years from now. 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 81% 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.

earnings-per-share-growth
NasdaqCM:EVOK Earnings Per Share Growth March 14th 2021

Given this is a high-level overview, we won’t go into details of Evoke Pharma's upcoming projects, though, bear in mind that typically a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we would like to bring into light with Evoke Pharma is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

This article is not intended to be a comprehensive analysis on Evoke Pharma, so if you are interested in understanding the company at a deeper level, take a look at Evoke Pharma's company page on Simply Wall St. We've also put together a list of relevant factors you should look at:

  1. Historical Track Record: What has Evoke Pharma'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 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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