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The Beauty Health Company (NASDAQ:SKIN) On The Verge Of Breaking Even

·2 min read

With the business potentially at an important milestone, we thought we'd take a closer look at The Beauty Health Company's (NASDAQ:SKIN) future prospects. The Beauty Health Company designs, develops, manufactures, markets, and sells aesthetic technologies and products worldwide. On 31 December 2021, the US$3.0b market-cap company posted a loss of US$375m for its most recent financial year. The most pressing concern for investors is Beauty Health's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Beauty Health

According to the 9 industry analysts covering Beauty Health, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$4.9m in 2022. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 125%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of Beauty Health's upcoming projects, but, keep in mind that by and large 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 Beauty Health is its debt-to-equity ratio of over 2x. 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 Beauty Health, so if you are interested in understanding the company at a deeper level, take a look at Beauty Health's company page on Simply Wall St. We've also compiled a list of pertinent factors you should further examine:

  1. Valuation: What is Beauty 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 Beauty 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 Beauty 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.

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.