When Will Bubs Australia Limited (ASX:BUB) Turn A Profit?

By

Simply Wall St

Published

May 21, 2022

Bubs Australia Limited (ASX:BUB) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Bubs Australia Limited, together with its subsidiaries, engages in the production and sale of various infant nutrition products in Australia, China, and internationally. The AU$267m market-cap company posted a loss in its most recent financial year of AU$75m and a latest trailing-twelve-month loss of AU$62m shrinking the gap between loss and breakeven. As path to profitability is the topic on Bubs Australia'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.

View our latest analysis for Bubs Australia

According to the 4 industry analysts covering Bubs Australia, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$317k in 2024. Therefore, the company is expected to breakeven roughly 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 65%, 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.

ASX:BUB Earnings Per Share Growth May 21st 2022

Given this is a high-level overview, we won’t go into details of Bubs Australia's upcoming projects, however, bear in mind that by and large 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 The company has managed its capital judiciously, with debt making up 2.3% 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.

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