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When Can We Expect A Profit From Accuray Incorporated (NASDAQ:ARAY)?

Simply Wall St

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Accuray Incorporated's (NASDAQ:ARAY): Accuray Incorporated designs, develops, and sells radiosurgery and radiation therapy systems for the treatment of tumors in the body. The US$400m market-cap posted a loss in its most recent financial year of -US$23.9m and a latest trailing-twelve-month loss of -US$23.6m shrinking the gap between loss and breakeven. As path to profitability is the topic on ARAY’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for ARAY, its year of breakeven and its implied growth rate.

See our latest analysis for Accuray

According to the 6 industry analysts covering ARAY, the consensus is breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of US$1.5m in 2020. So, ARAY is predicted to breakeven approximately a couple of months from now! In order to meet this breakeven date, I calculated the rate at which ARAY must grow year-on-year. It turns out an average annual growth rate of 90% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:ARAY Past and Future Earnings, April 4th 2019

Given this is a high-level overview, I won’t go into details of ARAY’s upcoming projects, but, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one issue worth mentioning. ARAY currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and ARAY has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on ARAY, so if you are interested in understanding the company at a deeper level, take a look at ARAY’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should look at:

  1. Valuation: What is ARAY 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 ARAY 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 Accuray’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.