When Can We Expect A Profit From Exact Sciences Corporation (NASDAQ:EXAS)?

Exact Sciences Corporation’s (NASDAQ:EXAS): Exact Sciences Corporation, a molecular diagnostics company, focuses on developing products for the early detection and prevention of various cancers in the United States. The US$12b market-cap company announced a latest loss of -US$175.1m on 31 December 2018 for its most recent financial year result. The most pressing concern for investors is EXAS’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for EXAS.

View our latest analysis for Exact Sciences

According to the 13 industry analysts covering EXAS, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$51m in 2021. So, EXAS is predicted to breakeven approximately 2 years from now. What rate will EXAS 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 47%, which is rather optimistic! If this rate turns out to be too aggressive, EXAS may become profitable much later than analysts predict.

NasdaqCM:EXAS Past and Future Earnings, February 28th 2019
NasdaqCM:EXAS Past and Future Earnings, February 28th 2019

Given this is a high-level overview, I won’t go into details of EXAS’s upcoming projects, though, bear in mind that by and large biotechs, 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.

One thing I would like to bring into light with EXAS is its debt-to-equity ratio of 101%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and EXAS has considerably exceeded this. 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 EXAS, so if you are interested in understanding the company at a deeper level, take a look at EXAS’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should look at:

  1. Valuation: What is EXAS 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 EXAS 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 Exact Sciences’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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.