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We feel now is a pretty good time to analyse Theratechnologies Inc.'s (TSE:TH) business as it appears the company may be on the cusp of a considerable accomplishment. Theratechnologies Inc., a biopharmaceutical company, focuses on the development and commercialization of various therapies to address the unmet medical needs in the United States, Canada, and Europe. The CA$297m market-cap company posted a loss in its most recent financial year of US$32m and a latest trailing-twelve-month loss of US$35m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Theratechnologies 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.
Theratechnologies is bordering on breakeven, according to the 4 Canadian Biotechs analysts. They expect the company to post a final loss in 2023, before turning a profit of US$4.5m in 2024. The company is therefore projected to breakeven around 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 67% year-on-year, on average, which is extremely buoyant. 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 Theratechnologies' upcoming projects, but, keep in mind that by and large a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. Theratechnologies currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company 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 Theratechnologies 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 Theratechnologies, take a look at Theratechnologies' company page on Simply Wall St. We've also put together a list of essential factors you should look at:
Historical Track Record: What has Theratechnologies' performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Theratechnologies' board and the CEO’s background.
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.