We feel now is a pretty good time to analyse Evoke Pharma, Inc.'s (NASDAQ:EVOK) business as it appears the company may be on the cusp of a considerable accomplishment. Evoke Pharma, Inc., a specialty pharmaceutical company, primarily focuses on the development and commercialization of drugs for the treatment of gastroenterological disorders and diseases. With the latest financial year loss of US$7.8m and a trailing-twelve-month loss of US$6.5m, the US$4.8m market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on Evoke Pharma's investors mind, we've decided to gauge market sentiment. 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 Evoke Pharma

Evoke Pharma is bordering on breakeven, according to some American Pharmaceuticals analysts. They expect the company to post a final loss in 2024, before turning a profit of US$938k in 2025. Therefore, the company is expected to breakeven just over a year from now. 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 117% year-on-year, on average, 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.

We're not going to go through company-specific developments for Evoke Pharma given that this is a high-level summary, 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.

One thing we would like to bring into light with Evoke Pharma is its debt-to-equity ratio of 188%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. 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 Evoke Pharma, so if you are interested in understanding the company at a deeper level, take a look at Evoke Pharma's company page on Simply Wall St. We've also put together a list of essential factors you should further examine:

1. Historical Track Record: What has Evoke Pharma's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Evoke Pharma'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.