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BEST Inc.'s (NYSE:BEST) Path To Profitability

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·3 min read
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BEST Inc. (NYSE:BEST) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. BEST Inc. operates as a smart supply chain service provider in the People's Republic of China. The US$998m market-cap company posted a loss in its most recent financial year of CN¥202m and a latest trailing-twelve-month loss of CN¥1.3b leading to an even wider gap between loss and breakeven. The most pressing concern for investors is BEST's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for BEST

BEST is bordering on breakeven, according to the 5 American Logistics analysts. They expect the company to post a final loss in 2021, before turning a profit of CN¥483m in 2022. Therefore, the company is expected to breakeven just over a year 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 104%, which is rather optimistic! 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 BEST's growth isn’t the focus of this broad overview, however, take into account 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. BEST currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of BEST to cover in one brief article, but the key fundamentals for the company can all be found in one place – BEST's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further examine:

  1. Valuation: What is BEST 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 BEST 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 BEST’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.