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With the business potentially at an important milestone, we thought we'd take a closer look at NEXTDC Limited's (ASX:NXT) future prospects. NEXTDC Limited, a technology company, provides data center outsourcing solutions, connectivity services, and infrastructure management software in Australia. The AU$5.3b market-cap company announced a latest loss of AU$21m on 30 June 2021 for its most recent financial year result. Many investors are wondering about the rate at which NEXTDC 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.
NEXTDC is bordering on breakeven, according to the 15 Australian IT analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$6.5m in 2022. So, the company is predicted to breakeven approximately a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 41% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving NEXTDC's growth isn’t the focus of this broad overview, but, take into account that typically 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 NEXTDC is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in NEXTDC's case is 47%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are key fundamentals of NEXTDC 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 NEXTDC, take a look at NEXTDC's company page on Simply Wall St. We've also put together a list of essential factors you should further examine:
Historical Track Record: What has NEXTDC's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on NEXTDC'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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