Market Sentiment Around Loss-Making Verastem Inc (NASDAQ:VSTM)

Verastem Inc’s (NASDAQ:VSTM): Verastem, Inc., a biopharmaceutical company, focuses on developing and commercializing drugs for the treatment of cancer. The company’s loss has recently broadened since it announced a -US$67.80m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$75.85m, moving it further away from breakeven. The most pressing concern for investors is VSTM’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for VSTM.

View out our latest analysis for Verastem

According to the industry analysts covering VSTM, breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$23.89m in 2022. Therefore, VSTM is expected to breakeven roughly a couple of months from now! In order to meet this breakeven date, I calculated the rate at which VSTM must grow year-on-year. It turns out an average annual growth rate of 41.54% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGM:VSTM Past Future Earnings June 19th 18
NasdaqGM:VSTM Past Future Earnings June 19th 18

Underlying developments driving VSTM’s growth isn’t the focus of this broad overview, but, bear in mind that generally biotechs, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one aspect worth mentioning. VSTM has managed its capital judiciously, with debt making up 38.68% of equity. This means that VSTM has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of VSTM 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 VSTM, take a look at VSTM’s company page on Simply Wall St. I’ve also put together a list of important factors you should further examine:

  1. Valuation: What is VSTM 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 VSTM 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 Verastem’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.