Market Sentiment Around Loss-Making Sarepta Therapeutics, Inc. (NASDAQ:SRPT)

Sarepta Therapeutics, Inc.’s (NASDAQ:SRPT): Sarepta Therapeutics, Inc. focuses on the discovery and development of RNA-based therapeutics, gene therapy, and other genetic medicine approaches for the treatment of rare diseases. The company’s loss has recently broadened since it announced a -US$361.9m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$620.3m, moving it further away from breakeven. Many investors are wondering the rate at which SRPT will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for SRPT’s growth and when analysts expect the company to become profitable.

View our latest analysis for Sarepta Therapeutics

Consensus from the 22 Biotechs analysts is SRPT is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$1.0b in 2022. So, SRPT is predicted to breakeven approximately 2 years from now. How fast will SRPT have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 59% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, SRPT may become profitable much later than analysts predict.

NasdaqGS:SRPT Past and Future Earnings, January 14th 2020
NasdaqGS:SRPT Past and Future Earnings, January 14th 2020

Underlying developments driving SRPT’s growth isn’t the focus of this broad overview, however, 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one issue worth mentioning. SRPT currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in SRPT’s case is 44%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of SRPT to cover in one brief article, but the key fundamentals for the company can all be found in one place – SRPT’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further research:

  1. Valuation: What is SRPT 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 SRPT 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 Sarepta Therapeutics’s board and the CEO’s back ground.
  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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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