Breakeven On The Horizon For AVITA Medical, Inc. (NASDAQ:RCEL)

With the business potentially at an important milestone, we thought we'd take a closer look at AVITA Medical, Inc.'s (NASDAQ:RCEL) future prospects. AVITA Medical, Inc., together with its subsidiaries, operates as a regenerative medicine company in the United States and internationally. On 31 December 2023, the US$242m market-cap company posted a loss of US$35m for its most recent financial year. Many investors are wondering about the rate at which AVITA Medical will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for AVITA Medical

According to the 11 industry analysts covering AVITA Medical, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$5.6m in 2026. So, the company is predicted to breakeven approximately 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 62%, 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 AVITA Medical's growth isn’t the focus of this broad overview, however, bear in mind 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 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 issue worth mentioning. AVITA Medical currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in AVITA Medical's case is 81%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is AVITA Medical 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 AVITA Medical is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on AVITA Medical’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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.