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When Will Establishment Labs Holdings Inc. (NASDAQ:ESTA) Become Profitable?

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Establishment Labs Holdings Inc. (NASDAQ:ESTA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Establishment Labs Holdings Inc., a medical technology company, manufactures and markets medical devices for aesthetic and reconstructive plastic surgery. The US$1.4b market-cap company posted a loss in its most recent financial year of US$41m and a latest trailing-twelve-month loss of US$40m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Establishment Labs Holdings 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.

Check out our latest analysis for Establishment Labs Holdings

Consensus from 5 of the American Medical Equipment analysts is that Establishment Labs Holdings is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$8.4m in 2024. 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 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 74% year-on-year, on average, which signals high confidence from analysts. 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 Establishment Labs Holdings given that this is a high-level summary, though, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Establishment Labs Holdings is its debt-to-equity ratio of 110%. 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 too many aspects of Establishment Labs Holdings to cover in one brief article, but the key fundamentals for the company can all be found in one place – Establishment Labs Holdings' company page on Simply Wall St. We've also put together a list of relevant factors you should further research:

  1. Historical Track Record: What has Establishment Labs Holdings' 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 Establishment Labs Holdings' 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.

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