Plus Products Inc.'s (CNSX:PLUS): Plus Products Inc. manufactures cannabis products in California. The CA$79m market-cap posted a loss in its most recent financial year of -US$6.8m and a latest trailing-twelve-month loss of -US$23.1m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on PLUS’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for PLUS’s growth and when analysts expect the company to become profitable.

See our latest analysis for Plus Products

Consensus from the 2 Pharmaceuticals analysts is PLUS is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$12m in 2021. PLUS is therefore projected to breakeven around 2 years from now. What rate will PLUS have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 106%, which is rather optimistic! If this rate turns out to be too aggressive, PLUS may become profitable much later than analysts predict.

Underlying developments driving PLUS’s growth isn’t the focus of this broad overview, however, bear in mind that generally pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing I would like to bring into light with PLUS is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in PLUS’s case is 95%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on PLUS, so if you are interested in understanding the company at a deeper level, take a look at PLUS’s company page on Simply Wall St. I’ve also put together a list of essential factors you should look at:

1. Valuation: What is PLUS 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 PLUS 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 Plus Products’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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