With the business potentially at an important milestone, we thought we'd take a closer look at Genetic Signatures Limited's (ASX:GSS) future prospects. Genetic Signatures Limited operates as a molecular diagnostic (MDx) company in North America and Australia. The AU$290m market-cap company announced a latest loss of AU$2.1m on 30 June 2020 for its most recent financial year result. Many investors are wondering about the rate at which Genetic Signatures will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Expectations from some of the Australian Life Sciences analysts is that Genetic Signatures is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$7.6m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 34% is expected, which is rather optimistic! 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 Genetic Signatures given that this is a high-level summary, though, bear in mind that typically a life science company has lumpy cash flows which are contingent on the product and stage of development the company is in. 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 Genetic Signatures has no debt on its balance sheet, which is quite unusual for a cash-burning life science company, 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.
There are key fundamentals of Genetic Signatures which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Genetic Signatures, take a look at Genetic Signatures' company page on Simply Wall St. We've also put together a list of important aspects you should look at:
Historical Track Record: What has Genetic Signatures' 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.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Genetic Signatures' board and the CEO’s background.
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.
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. 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.
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