21Vianet Group, Inc.'s (NASDAQ:VNET): 21Vianet Group, Inc. provides carrier and cloud-neutral Internet data center services to Internet companies, government entities, blue-chip enterprises, and small-to mid-sized enterprises in the People’s Republic of China. With the latest financial year loss of CN¥182.3m and a trailing-twelve month of CN¥326.7m, the US$2.5b market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which VNET will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for VNET, its year of breakeven and its implied growth rate.
Consensus from the 7 IT analysts is VNET is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of CN¥5.3m in 2021. VNET is therefore projected to breakeven around a couple of months from now! In order to meet this breakeven date, I calculated the rate at which VNET must grow year-on-year. It turns out an average annual growth rate of 64% is expected, which signals high confidence from analysts. 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 VNET’s upcoming projects, though, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing I would like to bring into light with VNET is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in VNET’s case is 87%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are key fundamentals of VNET which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at VNET, take a look at VNET’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should look at:
- Valuation: What is VNET 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 VNET is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on 21Vianet Group’s board and the CEO’s back ground.
- 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. 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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