Elanco Animal Health Incorporated (NYSE:ELAN): Are Analysts Optimistic?

With the business potentially at an important milestone, we thought we'd take a closer look at Elanco Animal Health Incorporated's (NYSE:ELAN) future prospects. Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals. With the latest financial year loss of US$1.2b and a trailing-twelve-month loss of US$1.3b, the US$7.0b market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Elanco Animal Health's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Elanco Animal Health

According to the 11 industry analysts covering Elanco Animal Health, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of US$60m in 2025. So, the company is predicted to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 86% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Elanco Animal Health's upcoming projects, however, keep in mind that generally pharmaceuticals, 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 we wrap up, there’s one issue worth mentioning. Elanco Animal Health currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Elanco Animal Health's case is 95%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Elanco Animal Health 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 Elanco Animal Health, take a look at Elanco Animal Health's company page on Simply Wall St. We've also put together a list of pertinent factors you should look at:

1. Valuation: What is Elanco Animal Health 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 Elanco Animal Health 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 Elanco Animal Health’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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com