We feel now is a pretty good time to analyse Procaps Group, S.A.'s (NASDAQ:PROC) business as it appears the company may be on the cusp of a considerable accomplishment. Procaps Group, S.A. operates as an integrated healthcare and pharmaceutical company worldwide. With the latest financial year loss of US$10m and a trailing-twelve-month loss of US$45m, the US$905m market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Procaps Group's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Consensus from 2 of the American Pharmaceuticals analysts is that Procaps Group is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$46m in 2022. The company is therefore projected to breakeven around a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 106% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Procaps Group given that this is a high-level summary, however, keep 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 we wrap up, there’s one issue worth mentioning. Procaps Group currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of Procaps Group to cover in one brief article, but the key fundamentals for the company can all be found in one place – Procaps Group's company page on Simply Wall St. We've also compiled a list of pertinent factors you should further research:
- Valuation: What is Procaps Group 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 Procaps Group 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 Procaps Group’s board and the CEO’s background.
- 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.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.