XOMA Royalty Corporation (NASDAQ:XOMA) On The Verge Of Breaking Even

With the business potentially at an important milestone, we thought we'd take a closer look at XOMA Royalty Corporation's (NASDAQ:XOMA) future prospects. XOMA Royalty Corporation operates as a biotech royalty aggregator in the United States and the Asia Pacific. With the latest financial year loss of US$19m and a trailing-twelve-month loss of US$16m, the US$474m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which XOMA Royalty will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

XOMA Royalty is bordering on breakeven, according to the 4 American Biotechs analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$9.5m in 2025. So, the company is predicted to breakeven approximately 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 58%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving XOMA Royalty's growth isn’t the focus of this broad overview, but, keep in mind that by and large biotechs, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

View our latest analysis for XOMA Royalty

Before we wrap up, there’s one issue worth mentioning. XOMA Royalty currently has a debt-to-equity ratio of 123%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of XOMA Royalty which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at XOMA Royalty, take a look at XOMA Royalty's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:

1. Historical Track Record: What has XOMA Royalty'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 XOMA Royalty'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.