T2 Biosystems, Inc.’s (NASDAQ:TTOO): T2 Biosystems, Inc., an in vitro diagnostics company, develops diagnostic products and product candidates in the United States and internationally. On 31 December 2018, the US$123m market-cap posted a loss of -US$51.2m for its most recent financial year. As path to profitability is the topic on TTOO’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for TTOO, its year of breakeven and its implied growth rate.
TTOO is bordering on breakeven, according to the 6 Biotechs analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$966k in 2021. Therefore, TTOO is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which TTOO must grow year-on-year. It turns out an average annual growth rate of 45% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, TTOO may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of TTOO’s upcoming projects, though, bear in mind 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. TTOO currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and TTOO has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are key fundamentals of TTOO 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 TTOO, take a look at TTOO’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further research:
- Valuation: What is TTOO 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 TTOO 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 T2 Biosystems’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.
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