NEX Focus Will Advance Mobile X-ray And CT Imaging

Key Takeaways

• Strategic focus on NEX technology and partnerships aim to boost revenue with high-margin medical imaging and baggage scanner products.
  
• U.S. government funding for CT development secures financial stability, fostering innovation and future revenue growth upon commercialization.
  
• Strategic reset and cost-cutting measures signal financial challenges that may affect future profitability and margin stability if further restructuring is required.

Catalysts

Designs, develops, manufactures, and commercializes healthcare and security markets products using micro-X proprietary cold cathode X-ray technology in Australia, the United States, Asia-Pacific, Europe, the Middle East, and Africa.

• The strategic reset to focus on NEX technology for the medical imaging market positions Micro-X to capitalize on higher-margin products like Rover Plus, mobile X-ray, and CT imaging solutions, which could significantly boost future revenues.
  
• The partnership with Billion Prima is expected to generate long-term revenue by selling Micro-X tubes and generators after the release of the new baggage scanner in the Southeast Asian market, impacting future earnings.
  
• Accelerated performance and reliability enhancements in Head CT technology, moving towards human imaging trials, could enhance Micro-X's product portfolio and drive revenue growth through new market entries post-approval.
  
• The development of full-body CT with $25 million in U.S. government funding from ARPA-H provides a secured financial base and potential for high-value product innovation, likely to increase revenue upon successful commercialization.
  
• Anticipated large sales opportunities for Rover Plus in the U.S. medical market, pending contractual agreements, could provide immediate revenue boosts and improve net margins through economies of scale.

Micro-X Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Micro-X's revenue will grow by 42.6% annually over the next 3 years.
• Analysts are not forecasting that Micro-X will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Micro-X's profit margin will increase from -76.3% to the average AU Medical Equipment industry of 9.4% in 3 years.
• If Micro-X's profit margin were to converge on the industry average, you could expect earnings to reach A$3.9 million (and earnings per share of A$0.01) by about May 2028, up from A$-10.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 36.5x on those 2028 earnings, up from -3.7x today. This future PE is lower than the current PE for the AU Medical Equipment industry at 36.6x.
• Analysts expect the number of shares outstanding to grow by 0.27% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.17%, as per the Simply Wall St company report.

Micro-X Future Earnings Per Share Growth

Risks

• The strategic reset and cost-cutting measures indicate financial challenges, which may impact future net margins and profitability if further restructuring is needed.
  
• The dependency on securing large sales opportunities with the Rover Plus may lead to fluctuations in revenue, particularly if these opportunities do not materialize as expected.
  
• Significant reliance on partnerships for revenue generation, such as with Billion Prima, introduces execution risk and potential delays, which could impact short-term cash flow and earnings.
  
• The ARPA-H and DHS projects are complex and subject to technical and regulatory challenges, which could delay product development and result in increased costs, affecting future earnings.
  
• The global economic uncertainty, coupled with potential impacts from U.S. tariffs and supply chain disruptions, could pose risks to operational costs and revenue stability.

Valuation

• The analysts have a consensus price target of A$0.17 for Micro-X based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$41.0 million, earnings will come to A$3.9 million, and it would be trading on a PE ratio of 36.5x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of A$0.06, the analyst price target of A$0.17 is 64.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.