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Groupon, Inc. (NASDAQ:GRPN): When Will It Breakeven?

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Groupon, Inc. (NASDAQ:GRPN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Groupon, Inc. operates a marketplace that connects consumers to merchants. The US$1.1b market-cap company’s loss lessened since it announced a US$288m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$60m, as it approaches breakeven. Many investors are wondering about the rate at which Groupon will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Groupon

According to the 6 industry analysts covering Groupon, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$60m in 2022. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 47%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Groupon given that this is a high-level summary, but, bear in mind 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 Groupon is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Groupon to cover in one brief article, but the key fundamentals for the company can all be found in one place – Groupon's company page on Simply Wall St. We've also compiled a list of key aspects you should further research:

  1. Valuation: What is Groupon 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 Groupon is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Groupon’s board and the CEO’s background.

  3. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.