Stock Analysis

Market Sentiment Around Loss-Making SCYNEXIS, Inc. (NASDAQ:SCYX)

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NasdaqGM:SCYX
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With the business potentially at an important milestone, we thought we'd take a closer look at SCYNEXIS, Inc.'s (NASDAQ:SCYX) future prospects. SCYNEXIS, Inc., a biotechnology company, delivers therapies for the treatment fungal infections in the United States. With the latest financial year loss of US$54m and a trailing-twelve-month loss of US$27m, the US$165m market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on SCYNEXIS' 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.

Check out our latest analysis for SCYNEXIS

Consensus from 7 of the American Pharmaceuticals analysts is that SCYNEXIS is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$22m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 64% 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.

earnings-per-share-growth
NasdaqGM:SCYX Earnings Per Share Growth March 15th 2021

Underlying developments driving SCYNEXIS' growth isn’t the focus of this broad overview, though, take into account that typically pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. SCYNEXIS currently has a debt-to-equity ratio of 112%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of SCYNEXIS which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at SCYNEXIS, take a look at SCYNEXIS' company page on Simply Wall St. We've also put together a list of relevant aspects you should look at:

  1. Valuation: What is SCYNEXIS 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 SCYNEXIS 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 SCYNEXIS’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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Valuation is complex, but we're helping make it simple.

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