ResApp Health Limited’s (ASX:RAP): ResApp Health Limited develops and commercializes the ResApp technology to provide health care solutions for respiratory diseases. The AU$76m market-cap company announced a latest loss of -AU$6.5m on 30 June 2018 for its most recent financial year result. The most pressing concern for investors is RAP’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for RAP’s growth and when analysts expect the company to become profitable.
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According to the industry analysts covering RAP, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$17m in 2021. So, RAP is predicted to breakeven approximately 3 years from today. What rate will RAP have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 98%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of RAP’s upcoming projects, though, bear in mind that generally a healthcare tech company has lumpy cash flows which are contingent on the product 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.
Before I wrap up, there’s one aspect worth mentioning. RAP currently has no debt on its balance sheet, which is quite unusual for a cash-burning healthcare tech company, which usually has a high level of debt relative to its equity. This means that RAP 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:
This article is not intended to be a comprehensive analysis on RAP, so if you are interested in understanding the company at a deeper level, take a look at RAP’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should look at:
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Historical Track Record: What has RAP’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.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on ResApp Health’s board and the CEO’s back ground.
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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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.