Breakeven On The Horizon For Elanco Animal Health Incorporated (NYSE:ELAN)

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Elanco Animal Health Incorporated (NYSE:ELAN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals. On 31 December 2023, the US$7.8b market-cap company posted a loss of US$1.2b for its most recent financial year. The most pressing concern for investors is Elanco Animal Health’s path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Elanco Animal Health

According to the 10 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$83m in 2025. So, the company is predicted to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 84% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

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NYSE:ELAN Earnings Per Share Growth March 26th 2024

Given this is a high-level overview, we won’t go into details of Elanco Animal Health’s upcoming projects, but, keep in mind that generally 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 we wrap up, there’s one issue worth mentioning. Elanco Animal Health currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Elanco Animal Health’s case is 93%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Elanco Animal Health to cover in one brief article, but the key fundamentals for the company can all be found in one place – Elanco Animal Health’s company page on Simply Wall St. We’ve also compiled a list of key aspects you should further research:

  1. 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.
  2. 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.
  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.

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.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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