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Chegg, Inc. (NYSE:CHGG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Chegg, Inc. operates direct-to-student learning platform that supports students on their journey from high school to college and into their career with tools designed to help them to learn their course materials, succeed in their classes, and save money on required materials. The company’s loss has recently broadened since it announced a US$6.2m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$66m, moving it further away from breakeven. Many investors are wondering about the rate at which Chegg will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Consensus from 18 of the American Consumer Services analysts is that Chegg is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$66m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 45% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Chegg's upcoming projects, however, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. Chegg currently has a debt-to-equity ratio of 135%. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are key fundamentals of Chegg 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 Chegg, take a look at Chegg's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:
Valuation: What is Chegg 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 Chegg 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 Chegg’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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