With the business potentially at an important milestone, we thought we'd take a closer look at KemPharm, Inc.'s (NASDAQ:KMPH) future prospects. KemPharm, Inc., a specialty pharmaceutical company, discovers and develops various proprietary prodrugs to treat serious medical conditions in the United States. The US$222m market-cap company posted a loss in its most recent financial year of US$63m and a latest trailing-twelve-month loss of US$17m shrinking the gap between loss and breakeven. The most pressing concern for investors is KemPharm's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to the 2 industry analysts covering KemPharm, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$11m in 2023. So, the company is predicted to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 68%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for KemPharm given that this is a high-level summary, however, take into account that by and large a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before we wrap up, there’s one aspect worth mentioning. KemPharm currently has no debt on its balance sheet, which is rare for a loss-making pharma, which typically has high 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 KemPharm to cover in one brief article, but the key fundamentals for the company can all be found in one place – KemPharm's company page on Simply Wall St. We've also compiled a list of important factors you should look at:
- Valuation: What is KemPharm 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 KemPharm is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on KemPharm’s 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
