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Market Sentiment Around Loss-Making PainChek Limited (ASX:PCK)

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·3 min read
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With the business potentially at an important milestone, we thought we'd take a closer look at PainChek Limited's (ASX:PCK) future prospects. PainChek Limited develops and commercializes mobile medical device applications that provides pain assessment for individuals primarily in Australia and Europe. With the latest financial year loss of AU$12m and a trailing-twelve-month loss of AU$3.9m, the AU$75m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which PainChek will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for PainChek

Expectations from some of the Australian Healthcare Services analysts is that PainChek is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of AU$6.2m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 101% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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

We're not going to go through company-specific developments for PainChek given that this is a high-level summary, but, take into account that typically healthcare tech companies, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that PainChek has no debt on its balance sheet, which is rare for a loss-making healthcare tech company, which typically has high 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.

Next Steps:

There are too many aspects of PainChek to cover in one brief article, but the key fundamentals for the company can all be found in one place – PainChek's company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:

  1. Valuation: What is PainChek 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 PainChek 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 PainChek’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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.