Spectral Medical Inc. (TSE:EDT): When Will It Breakeven?

·3 min read

We feel now is a pretty good time to analyse Spectral Medical Inc.'s (TSE:EDT) business as it appears the company may be on the cusp of a considerable accomplishment. Spectral Medical Inc., together with its subsidiaries, focuses on the development and commercialization of products for the treatment of septic shock and renal disease in North America. The CA$102m market-cap company posted a loss in its most recent financial year of CA$8.8m and a latest trailing-twelve-month loss of CA$9.8m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Spectral Medical'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.

View our latest analysis for Spectral Medical

According to some industry analysts covering Spectral Medical, breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of CA$13m in 2024. So, the company is predicted to breakeven approximately 2 years from today. 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 80% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving Spectral Medical's growth isn’t the focus of this broad overview, but, 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. 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 aspect worth mentioning. Spectral Medical currently has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Spectral Medical to cover in one brief article, but the key fundamentals for the company can all be found in one place – Spectral Medical's company page on Simply Wall St. We've also compiled a list of relevant factors you should look at:

  1. Historical Track Record: What has Spectral Medical's 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.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Spectral Medical'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.

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

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.

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