When Will Sarepta Therapeutics, Inc. (NASDAQ:SRPT) Become Profitable?

Sarepta Therapeutics, Inc.'s (NASDAQ:SRPT): Sarepta Therapeutics, Inc., a commercial-stage biopharmaceutical company, focuses on the discovery and development of RNA-targeted therapeutics, gene therapy, and other genetic therapeutic modalities approaches for the treatment of rare diseases. The US$9.2b market-cap company announced a latest loss of -US$715.1m on 31 December 2019 for its most recent financial year result. As path to profitability is the topic on SRPT’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for SRPT’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Sarepta Therapeutics

According to the 22 industry analysts covering SRPT, the consensus is breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$716m in 2022. Therefore, SRPT is expected to breakeven roughly 2 years from today. 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 rather optimistic! If this rate turns out to be too aggressive, SRPT may become profitable much later than analysts predict.

I’m not going to go through company-specific developments for SRPT given that this is a high-level summary, but, take into account that by and large biotechs, 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.

One thing I would like to bring into light with SRPT is its 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 83%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of SRPT which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at SRPT, take a look at SRPT’s company page on Simply Wall St. I’ve also compiled a list of key factors you should look at:

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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