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Mesoblast Limited's (ASX:MSB) Shift From Loss To Profit

We feel now is a pretty good time to analyse Mesoblast Limited's (ASX:MSB) business as it appears the company may be on the cusp of a considerable accomplishment. Mesoblast Limited engages in the development of regenerative medicine products in Australia, the United States, Singapore, the United Kingdom, and Switzerland. With the latest financial year loss of US$91m and a trailing-twelve-month loss of US$86m, the AU$814m market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Mesoblast's path to profitability – when will it 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 Mesoblast

Consensus from 6 of the Australian Biotechs analysts is that Mesoblast is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of US$100m in 2025. So, the company is predicted to breakeven approximately 3 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 75% is expected, 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

Given this is a high-level overview, we won’t go into details of Mesoblast's upcoming projects, though, 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 19% 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:

There are too many aspects of Mesoblast to cover in one brief article, but the key fundamentals for the company can all be found in one place – Mesoblast's company page on Simply Wall St. We've also put together a list of relevant factors you should further examine:

  1. Valuation: What is Mesoblast 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 Mesoblast 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 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.

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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