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With the business potentially at an important milestone, we thought we'd take a closer look at Montrose Environmental Group, Inc.'s (NYSE:MEG) future prospects. Montrose Environmental Group, Inc. operates as an environmental services company in the United States. The US$791m market-cap company posted a loss in its most recent financial year of US$43m and a latest trailing-twelve-month loss of US$120m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Montrose Environmental Group'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.
Consensus from 6 of the American Commercial Services analysts is that Montrose Environmental Group is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$5.8m in 2022. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 77% year-on-year, on average, 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.
We're not going to go through company-specific developments for Montrose Environmental Group given that this is a high-level summary, however, take into account that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with Montrose Environmental Group is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Montrose Environmental Group's case is 58%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are key fundamentals of Montrose Environmental Group 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 Montrose Environmental Group, take a look at Montrose Environmental Group's company page on Simply Wall St. We've also put together a list of key aspects you should look at:
Valuation: What is Montrose Environmental 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 Montrose Environmental Group 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 Montrose Environmental Group’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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