Loss-Making Elanco Animal Health Incorporated (NYSE:ELAN) Set To Breakeven

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. The US$7.1b market-cap company posted a loss in its most recent financial year of US$1.2b and a latest trailing-twelve-month loss of US$1.3b leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Elanco Animal Health will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Elanco Animal Health

Consensus from 10 of the American Pharmaceuticals analysts is that Elanco Animal Health is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$341m in 2024. Therefore, the company is expected to breakeven roughly a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 74%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Elanco Animal Health's growth isn’t the focus of this broad overview, but, bear in mind that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we would like to bring into light with Elanco Animal Health is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Elanco Animal Health's case is 96%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Elanco Animal Health, so if you are interested in understanding the company at a deeper level, take a look at Elanco Animal Health's company page on Simply Wall St. We've also put together a list of key 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.