Neos Therapeutics, Inc.’s (NASDAQ:NEOS): Neos Therapeutics, Inc., a pharmaceutical company, develops, manufactures, and commercializes products for the treatment of attention deficit hyperactivity disorder (ADHD) using its drug delivery technology platform. The US$45m market-cap company announced a latest loss of -US$16.9m on 31 December 2019 for its most recent financial year result. The most pressing concern for investors is NEOS’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for NEOS’s growth and when analysts expect the company to become profitable.
NEOS is bordering on breakeven, according to the 3 Pharmaceuticals analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$2.6m in 2021. NEOS is therefore projected to breakeven around a few months from now. In order to meet this breakeven date, I calculated the rate at which NEOS must grow year-on-year. It turns out an average annual growth rate of 62% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, NEOS may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for NEOS given that this is a high-level summary, however, 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. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
Before I wrap up, there’s one issue worth mentioning. NEOS 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. Oftentimes, losses exist only on paper but other times, it can be a red flag.
This article is not intended to be a comprehensive analysis on NEOS, so if you are interested in understanding the company at a deeper level, take a look at NEOS’s company page on Simply Wall St. I’ve also put together a list of essential factors you should look at:
- Valuation: What is NEOS 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 NEOS is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Neos Therapeutics’s board and the CEO’s back ground.
- 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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