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Loss-Making Pacific Edge Limited (NZSE:PEB) Expected To Breakeven In The Medium-Term

With the business potentially at an important milestone, we thought we'd take a closer look at Pacific Edge Limited's (NZSE:PEB) future prospects. Pacific Edge Limited, a cancer diagnostic company, researches, develops, and commercializes diagnostic and prognostic tools for the early detection and management of cancers in New Zealand, the United States, and internationally. The NZ$830m market-cap company’s loss lessened since it announced a NZ$19m loss in the full financial year, compared to the latest trailing-twelve-month loss of NZ$17m, as it approaches breakeven. The most pressing concern for investors is Pacific Edge's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Pacific Edge

According to the 3 industry analysts covering Pacific Edge, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of NZ$12m in 2023. The company is therefore projected to breakeven around 2 years from now. 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 101% is expected, which is rather optimistic! 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

Given this is a high-level overview, we won’t go into details of Pacific Edge's upcoming projects, however, take into account that generally biotechs, 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.

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Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 2.6% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

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

  1. Historical Track Record: What has Pacific Edge'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 Pacific Edge'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.

This article by Simply Wall St is general in nature. 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 (at) simplywallst.com.