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Loss-Making Mesoblast Limited (ASX:MSB) Expected To Breakeven In The Medium-Term

With the business potentially at an important milestone, we thought we'd take a closer look at Mesoblast Limited's (ASX:MSB) future prospects. Mesoblast Limited, a biopharmaceutical company, develops and commercializes allogeneic cellular medicines. The AU$1.3b market-cap company posted a loss in its most recent financial year of US$78m and a latest trailing-twelve-month loss of US$109m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Mesoblast 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 Mesoblast

Mesoblast is bordering on breakeven, according to the 6 Australian Biotechs analysts. They expect the company to post a final loss in 2023, before turning a profit of US$154m in 2024. 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 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which is rather optimistic! 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

Given this is a high-level overview, we won’t go into details of Mesoblast's upcoming projects, but, keep in mind that by and large 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.

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One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 15% 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 Mesoblast, so if you are interested in understanding the company at a deeper level, take a look at Mesoblast's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should look at:

  1. Historical Track Record: What has Mesoblast'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 Mesoblast'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.

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.

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