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Loss-Making Opthea Limited (ASX:OPT) Expected To Breakeven In The Medium-Term

Simply Wall St
·3-min read

With the business potentially at an important milestone, we thought we'd take a closer look at Opthea Limited's (ASX:OPT) future prospects. Opthea Limited, a biotechnology company, develops and commercializes therapies primarily for eye disease in Australia. On 30 June 2020, the AU$787m market-cap company posted a loss of AU$17m for its most recent financial year. As path to profitability is the topic on Opthea'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.

See our latest analysis for Opthea

Opthea is bordering on breakeven, according to the 2 Australian Biotechs analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$38m in 2022. The company is therefore projected to breakeven around 2 years 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 -21%,

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

Underlying developments driving Opthea's growth isn’t the focus of this broad overview, however, bear in mind that typically biotechs, depending on the stage of product development, have irregular periods of cash flow. So, periods of lower growth in the upcoming years is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that Opthea 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 key fundamentals of Opthea 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 Opthea, take a look at Opthea's company page on Simply Wall St. We've also put together a list of important aspects you should further examine:

  1. Historical Track Record: What has Opthea'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 Opthea'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@simplywallst.com.