Loss-Making ADT Inc. (NYSE:ADT) Expected To Breakeven In The Medium-Term
ADT Inc. (NYSE:ADT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. ADT Inc. provides security, automation, and smart home solutions to consumer and business customers in the United States. On 31 December 2020, the US$7.5b market-cap company posted a loss of US$632m for its most recent financial year. Many investors are wondering about the rate at which ADT 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 ADT
Consensus from 5 of the American Commercial Services analysts is that ADT is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of US$369m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 64% year-on-year, on average, which is extremely buoyant. 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 ADT's upcoming projects, though, 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.
Before we wrap up, there’s one issue worth mentioning. ADT currently has a 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. 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 ADT to cover in one brief article, but the key fundamentals for the company can all be found in one place – ADT's company page on Simply Wall St. We've also put together a list of essential factors you should further research:
Valuation: What is ADT 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 ADT 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 ADT’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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