Breakeven Is Near for Palo Alto Networks, Inc. (NASDAQ:PANW)
We feel now is a pretty good time to analyse Palo Alto Networks, Inc.'s (NASDAQ:PANW) business as it appears the company may be on the cusp of a considerable accomplishment. Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. On 31 July 2022, the US$56b market-cap company posted a loss of US$267m for its most recent financial year. The most pressing concern for investors is Palo Alto Networks' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Check out our latest analysis for Palo Alto Networks
Consensus from 32 of the American Software analysts is that Palo Alto Networks is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$20m in 2023. The company is therefore projected to breakeven around a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 108%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Palo Alto Networks given that this is a high-level summary, however, take into account that typically 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, 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.
Next Steps:
There are too many aspects of Palo Alto Networks to cover in one brief article, but the key fundamentals for the company can all be found in one place – Palo Alto Networks' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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