Cann Group Limited’s (ASX:CAN): Cann Group Limited engages in research and development, cultivation and production, manufacturing, clinical evaluation, processing, packaging, and distribution/supply of medicinal cannabis for a range of diseases and medical conditions in Australia. On 30 June 2019, the AU$135m market-cap posted a loss of -AU$10.9m for its most recent financial year. The most pressing concern for investors is CAN’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for CAN’s growth and when analysts expect the company to become profitable.
See our latest analysis for Cann Group
CAN is bordering on breakeven, according to the 3 Pharmaceuticals analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$7.5m in 2022. CAN is therefore projected to breakeven around 2 years from now. How fast will CAN 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 67% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, CAN may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for CAN given that this is a high-level summary, however, bear in mind 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one aspect worth mentioning. CAN has managed its capital judiciously, with debt making up of equity. This means that CAN 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 key fundamentals of CAN 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 CAN, take a look at CAN’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should further research:
- Valuation: What is CAN 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 CAN 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 Cann Group’s board and the CEO’s back ground.
- 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 [email protected]. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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