Omeros Corporation's (NASDAQ:OMER) Shift From Loss To Profit

By
Simply Wall St
Published
April 12, 2022
NasdaqGM:OMER
Source: Shutterstock

With the business potentially at an important milestone, we thought we'd take a closer look at Omeros Corporation's (NASDAQ:OMER) future prospects. Omeros Corporation, a commercial-stage biopharmaceutical company, discovers, develops, and commercializes small-molecule and protein therapeutics, and orphan indications targeting inflammation, complement-mediated diseases, cancers related to dysfunction of the immune system, and addictive and compulsive disorders. On 31 December 2021, the US$339m market-cap company posted a loss of US$192m for its most recent financial year. As path to profitability is the topic on Omeros' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Omeros

According to the 6 industry analysts covering Omeros, the consensus is that breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of US$6.9m in 2024. So, the company is predicted to breakeven approximately 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 63%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGM:OMER Earnings Per Share Growth April 12th 2022

Given this is a high-level overview, we won’t go into details of Omeros' upcoming projects, but, 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 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 Omeros is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is Omeros 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 Omeros 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 Omeros’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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