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When Will Alithya Group Inc. (TSE:ALYA) Become Profitable?

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Simply Wall St
·3 min read
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Alithya Group Inc. (TSE:ALYA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Alithya Group Inc. provides strategy and digital technology services in Canada, the United States, and Europe. With the latest financial year loss of CA$40m and a trailing-twelve-month loss of CA$49m, the CA$165m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Alithya Group will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Alithya Group

Alithya Group is bordering on breakeven, according to the 6 Canadian IT analysts. They expect the company to post a final loss in 2022, before turning a profit of CA$8.3m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. 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 114%, 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.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving Alithya Group's growth isn’t the focus of this broad overview, but, 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.

Before we wrap up, there’s one issue worth mentioning. Alithya Group currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Alithya Group's case is 50%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Alithya Group, so if you are interested in understanding the company at a deeper level, take a look at Alithya Group's company page on Simply Wall St. We've also compiled a list of important factors you should further research:

  1. Valuation: What is Alithya Group 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 Alithya Group 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 Alithya Group’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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.