We feel now is a pretty good time to analyse Palo Alto Networks, Inc.'s (NYSE:PANW) business as it appears the company may be on the cusp of a considerable accomplishment. Palo Alto Networks, Inc. provides cybersecurity platform solutions worldwide. The US$23b market-cap company announced a latest loss of US$267m on 31 July 2020 for its most recent financial year result. As path to profitability is the topic on Palo Alto Networks' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Palo Alto Networks is bordering on breakeven, according to the 33 American Software analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$62m in 2023. Therefore, the company is expected to breakeven roughly 3 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 44%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of Palo Alto Networks' upcoming projects, however, keep in mind that by and large 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. Palo Alto Networks 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. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are key fundamentals of Palo Alto Networks 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 Palo Alto Networks, take a look at Palo Alto Networks' company page on Simply Wall St. We've also compiled a list of key aspects you should look at:
Valuation: What is Palo Alto Networks 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 Palo Alto Networks 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 Palo Alto Networks’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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.