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Aroa Biosurgery Limited (ASX:ARX) Is Expected To Breakeven In The Near Future

With the business potentially at an important milestone, we thought we'd take a closer look at Aroa Biosurgery Limited's (ASX:ARX) future prospects. Aroa Biosurgery Limited, a regenerative medicine company, engages in the developing, manufacturing, and sells medical devices for wound and tissue repair using extracellular matrix (ECM) technology in the United States and internationally. On 31 March 2023, the AU$247m market-cap company posted a loss of NZ$396k for its most recent financial year. The most pressing concern for investors is Aroa Biosurgery'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.

See our latest analysis for Aroa Biosurgery

Aroa Biosurgery is bordering on breakeven, according to the 5 Australian Biotechs analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of NZ$7.7m in 2025. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 93% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Aroa Biosurgery given that this is a high-level summary, though, keep in mind that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

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Before we wrap up, there’s one aspect worth mentioning. Aroa Biosurgery currently has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Aroa Biosurgery 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 Aroa Biosurgery, take a look at Aroa Biosurgery's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:

  1. Valuation: What is Aroa Biosurgery 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 Aroa Biosurgery 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 Aroa Biosurgery’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.