With the business potentially at an important milestone, we thought we'd take a closer look at Open Lending Corporation's (NASDAQ:LPRO) future prospects. Open Lending Corporation provides lending enablement and risk analytics solutions to financial institutions in the United States. The US$3.8b market-cap company posted a loss in its most recent financial year of US$60m and a latest trailing-twelve-month loss of US$99m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Open Lending will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to the 9 industry analysts covering Open Lending, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$107m in 2021. The company is therefore projected to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 111% is expected, which is rather optimistic! 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 Open Lending's upcoming projects, though, 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 Open Lending is its debt-to-equity ratio of over 2x. Typically, 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 Open Lending, so if you are interested in understanding the company at a deeper level, take a look at Open Lending's company page on Simply Wall St. We've also compiled a list of key aspects you should further examine:
Valuation: What is Open Lending 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 Open Lending 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 Open Lending’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.
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