Atomo Diagnostics Limited’s (ASX:AT1): Atomo Diagnostics Limited researches, designs, develops, manufactures, and sells medical devices for blood-based rapid testing for professional use and self-testing. The AU$219m market-cap posted a loss in its most recent financial year of AU$5.1m and a latest trailing-twelve-month loss of AU$5.2m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on AT1’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for AT1’s growth and when analysts expect the company to become profitable.
Expectation from Medical Equipment analysts is AT1 is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of AU$3.3m in 2021. Therefore, AT1 is expected to breakeven roughly a couple of months from now! What rate will AT1 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 115%, which is extremely buoyant. If this rate turns out to be too aggressive, AT1 may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for AT1 given that this is a high-level summary, but, take into account 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. AT1 currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.
This article is not intended to be a comprehensive analysis on AT1, so if you are interested in understanding the company at a deeper level, take a look at AT1’s company page on Simply Wall St. I’ve also put together a list of important aspects you should further research:
- Valuation: What is AT1 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 AT1 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 Atomo Diagnostics’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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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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