With the business potentially at an important milestone, we thought we’d take a closer look at Elanco Animal Health Incorporated’s (NYSE:ELAN) future prospects. Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals. The US$6.3b market-cap company posted a loss in its most recent financial year of US$78m and a latest trailing-twelve-month loss of US$1.1b leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Elanco Animal Health’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.
View our latest analysis for Elanco Animal Health
According to the 8 industry analysts covering Elanco Animal Health, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$41m in 2025. 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 96%, which is extremely buoyant. 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 Elanco Animal Health given that this is a high-level summary, though, bear in mind that by and large pharmaceuticals, 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 we wrap up, there’s one issue worth mentioning. Elanco Animal Health currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Elanco Animal Health’s case is 96%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are key fundamentals of Elanco Animal Health 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 Elanco Animal Health, take a look at Elanco Animal Health’s company page on Simply Wall St. We’ve also put together a list of pertinent factors you should further examine:
- Valuation: What is Elanco Animal Health 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 Elanco Animal Health 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 Elanco Animal Health’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.
Valuation is complex, but we’re helping make it simple.
Find out whether Elanco Animal Health is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.