We feel now is a pretty good time to analyse Aroa Biosurgery Limited's (ASX:ARX) business as it appears the company may be on the cusp of a considerable accomplishment. Aroa Biosurgery Limited develops, manufactures, and sells medical devices for wound and soft tissue repair using extracellular matrix (ECM) technology in the United States and internationally. The AU$224m market-cap company announced a latest loss of NZ$11m on 31 March 2024 for its most recent financial year result. As path to profitability is the topic on Aroa Biosurgery's investors mind, we've decided to gauge market sentiment. 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 Aroa Biosurgery

Consensus from 5 of the Australian Biotechs analysts is that Aroa Biosurgery is on the verge of breakeven. They expect the company to post a final loss in 2025, before turning a profit of NZ$7.4m in 2026. 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 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 56% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Aroa Biosurgery's growth isn’t the focus of this broad overview, however, bear 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that Aroa Biosurgery has no debt on its balance sheet, which is rare for a loss-making 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 compiled a list of essential aspects you should further examine:

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.

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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.