21Vianet Group, Inc.'s (NASDAQ:VNET): 21Vianet Group, Inc. provides carrier and cloud-neutral Internet data center services to Internet companies, government entities, blue-chip enterprises, and small-to mid-sized enterprises in the People’s Republic of China. The US$801m market-cap company announced a latest loss of -CN¥205.1m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on VNET’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for VNET’s growth and when analysts expect the company to become profitable.
Consensus from the 2 IT analysts is VNET is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of CN¥20m in 2020. So, VNET is predicted to breakeven approximately a couple of months from now! In order to meet this breakeven date, I calculated the rate at which VNET must grow year-on-year. It turns out an average annual growth rate of 60% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, VNET may become profitable much later than analysts predict.
Underlying developments driving VNET’s growth isn’t the focus of this broad overview, but, 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.
One thing I would like to bring into light with VNET is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in VNET’s case is 61%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of VNET to cover in one brief article, but the key fundamentals for the company can all be found in one place – VNET’s company page on Simply Wall St. I’ve also put together a list of key aspects you should further research:
- Historical Track Record: What has VNET'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 21Vianet Group’s board and the CEO’s back ground.
- 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.
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