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With the business potentially at an important milestone, we thought we'd take a closer look at MeridianLink, Inc.'s (NYSE:MLNK) future prospects. MeridianLink, Inc. provides cloud-based software solutions for banks, credit unions, mortgage lenders, specialty lending providers, and consumer reporting agencies in the United States. The US$1.9b market-cap company posted a loss in its most recent financial year of US$25m and a latest trailing-twelve-month loss of US$18m shrinking the gap between loss and breakeven. As path to profitability is the topic on MeridianLink's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
MeridianLink is bordering on breakeven, according to the 8 American Software analysts. They expect the company to post a final loss in 2020, before turning a profit of US$3.5m in 2021. Therefore, the company is expected to breakeven roughly 12 months 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 82% year-on-year, on average, which signals high confidence from analysts. 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 MeridianLink's upcoming projects, however, keep in mind that typically 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. MeridianLink currently has a debt-to-equity ratio of 200%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on MeridianLink, so if you are interested in understanding the company at a deeper level, take a look at MeridianLink's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:
Valuation: What is MeridianLink 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 MeridianLink 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 MeridianLink’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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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