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When Will Avita Medical Limited (ASX:AVH) Turn A Profit?

Simply Wall St

Avita Medical Limited's (ASX:AVH): Avita Medical Limited operates as a regenerative medicine company in the Asia Pacific, Europe, the Middle East, Africa, and the Americas. On 30 June 2019, the AU$955m market-cap posted a loss of -AU$34.6m for its most recent financial year. As path to profitability is the topic on AVH’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for AVH’s growth and when analysts expect the company to become profitable.

See our latest analysis for Avita Medical

Consensus from the 2 Biotechs analysts is AVH is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$29m in 2022. So, AVH is predicted to breakeven approximately 3 years from now. How fast will AVH 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 71% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, AVH may become profitable much later than analysts predict.

ASX:AVH Past and Future Earnings, September 12th 2019
ASX:AVH Past and Future Earnings, September 12th 2019

Given this is a high-level overview, I won’t go into details of AVH’s upcoming projects, but, keep in mind that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing I’d like to point out is that AVH has no debt on its balance sheet, which is rare for a loss-making biotech, which usually has a high level of debt relative to its equity. AVH currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of AVH 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 AVH, take a look at AVH’s company page on Simply Wall St. I’ve also compiled a list of important factors you should further research:

  1. Valuation: What is AVH 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 AVH 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 Avita Medical’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.

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.

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. Thank you for reading.