Afterpay Limited (ASX:APT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Afterpay Limited provides payments solutions for customers, merchants, and businesses in Australia, New Zealand, the United States, Canada, and the United Kingdom. On 30 June 2020, the AU$26b market-cap company posted a loss of AU$20m for its most recent financial year. Many investors are wondering about the rate at which Afterpay will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Afterpay is bordering on breakeven, according to the 12 Australian IT analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$4.4m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 45%, 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 Afterpay's growth isn’t the focus of this broad overview, 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 we would like to bring into light with Afterpay is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Afterpay's case is 49%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of Afterpay to cover in one brief article, but the key fundamentals for the company can all be found in one place – Afterpay's company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:
Valuation: What is Afterpay 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 Afterpay 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 Afterpay’s board and the CEO’s background.
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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