co.don AG's (ETR:CNWK) Shift From Loss To Profit

co.don AG's (ETR:CNWK): co.don AG engages in cell cultivation for the regenerative treatment of articular cartilage and spinal disc defects worldwide. The company’s loss has recently broadened since it announced a -€8.8m loss in the full financial year, compared to the latest trailing-twelve-month loss of -€11.2m, moving it further away from breakeven. As path to profitability is the topic on CNWK’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for CNWK, its year of breakeven and its implied growth rate.

Check out our latest analysis for co.don

Consensus from the 2 Biotechs analysts is CNWK is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of €2.5m in 2022. CNWK is therefore projected to breakeven around 2 years from today. How fast will CNWK have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 69% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, CNWK may become profitable much later than analysts predict.

XTRA:CNWK Past and Future Earnings, February 25th 2020

Underlying developments driving CNWK’s growth isn’t the focus of this broad overview, but, keep in mind that by and large biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one aspect worth mentioning. CNWK currently has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which typically has high debt relative to its equity. This means that CNWK 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 key fundamentals of CNWK which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at CNWK, take a look at CNWK’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should look at:

1. Valuation: What is CNWK 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 CNWK 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 co.don’s board and the CEO’s back ground.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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