Market Sentiment Around Loss-Making Veracyte, Inc. (NASDAQ:VCYT)

With the business potentially at an important milestone, we thought we'd take a closer look at Veracyte, Inc.'s (NASDAQ:VCYT) future prospects. Veracyte, Inc. operates as a diagnostics company in the United States and internationally. The US$1.6b market-cap company posted a loss in its most recent financial year of US$74m and a latest trailing-twelve-month loss of US$68m shrinking the gap between loss and breakeven. The most pressing concern for investors is Veracyte'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 Veracyte

According to the 9 industry analysts covering Veracyte, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of US$9.8m in 2025. So, the company is predicted to breakeven just over a year from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 122% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of Veracyte's upcoming projects, however, bear in mind that by and large biotechs, 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.

One thing we’d like to point out is that Veracyte 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:

This article is not intended to be a comprehensive analysis on Veracyte, so if you are interested in understanding the company at a deeper level, take a look at Veracyte's company page on Simply Wall St. We've also compiled a list of pertinent factors you should further examine:

1. Valuation: What is Veracyte 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 Veracyte 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 Veracyte’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.

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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.

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