Stock Analysis

Medlab Clinical Limited (ASX:MDC) Is Expected To Breakeven In The Near Future

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Medlab Clinical Limited (ASX:MDC) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Medlab Clinical Limited, a medical research and development facility, engages in the nutraceutical products and pharmaceutical research businesses in Australia. The AU$51m market-cap company announced a latest loss of AU$13m on 30 June 2020 for its most recent financial year result. The most pressing concern for investors is Medlab Clinical's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Medlab Clinical

According to some industry analysts covering Medlab Clinical, breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of AU$4.2m in 2023. Therefore, the company is expected to breakeven roughly 3 years from now. 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 39% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

ASX:MDC Earnings Per Share Growth November 23rd 2020

Given this is a high-level overview, we won’t go into details of Medlab Clinical's upcoming projects, but, keep in mind that typically biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 0.8% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Medlab Clinical, so if you are interested in understanding the company at a deeper level, take a look at Medlab Clinical's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:

  1. Historical Track Record: What has Medlab Clinical'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.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Medlab Clinical'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.

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