Mesoblast Limited’s (ASX:MSB): Mesoblast Limited, a biopharmaceutical company, develops and commercializes allogeneic cellular medicines. With the latest financial year loss of US$89.8m and a trailing-twelve month loss of US$66.1m, the AU$2.8b market-cap alleviates its loss by moving closer towards its target of breakeven. As path to profitability is the topic on MSB’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for MSB’s growth and when analysts expect the company to become profitable.
According to the 7 industry analysts covering MSB, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$2.7m in 2021. MSB is therefore projected to breakeven around a few months from now. What rate will MSB 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 60%, 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 MSB’s growth isn’t the focus of this broad overview, however, take into account that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing I’d like to point out is that MSB has managed its capital prudently, with debt making up 18% of equity. This means that MSB has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
There are key fundamentals of MSB which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at MSB, take a look at MSB’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further examine:
- Valuation: What is MSB 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 MSB is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Mesoblast’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.
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