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ResApp Health Limited's (ASX:RAP): ResApp Health Limited develops digital healthcare solutions to assist doctors and allow patients to diagnose and manage respiratory disease. With the latest financial year loss of AU$5.4m and a trailing-twelve month of AU$5.9m, the AU$102m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is RAP’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for RAP.
According to the industry analysts covering RAP, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$7.3m in 2022. RAP is therefore projected to breakeven around 2 years from now. What rate will RAP have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 113%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving RAP’s growth isn’t the focus of this broad overview, though, take into account that generally a healthcare tech 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 I’d like to point out is that RAP 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 RAP 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 too many aspects of RAP to cover in one brief article, but the key fundamentals for the company can all be found in one place – RAP’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further research:
Historical Track Record: What has RAP's 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 ResApp Health’s board and the CEO’s back ground.
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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