Puma Biotechnology Inc’s (NASDAQ:PBYI): Puma Biotechnology, Inc., a biopharmaceutical company, focuses on the development and commercialization of products to enhance cancer care in the United States. The US$841m market-cap posted a loss in its most recent financial year of -US$292.0m and a latest trailing-twelve-month loss of -US$147.0m shrinking the gap between loss and breakeven. As path to profitability is the topic on PBYI’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for PBYI.
According to the industry analysts covering PBYI, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$111m in 2021. Therefore, PBYI is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which PBYI must grow year-on-year. It turns out an average annual growth rate of 73% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, PBYI may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for PBYI given that this is a high-level summary, but, take into account that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I would like to bring into light with PBYI is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in PBYI’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on PBYI, so if you are interested in understanding the company at a deeper level, take a look at PBYI’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should further examine:
- Valuation: What is PBYI 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 PBYI 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 Puma Biotechnology’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.