Loss-Making Performant Financial Corporation (NASDAQ:PFMT) Expected To Breakeven In The Medium-Term
We feel now is a pretty good time to analyse Performant Financial Corporation's (NASDAQ:PFMT) business as it appears the company may be on the cusp of a considerable accomplishment. Performant Financial Corporation provides technology-enabled audit, recovery, outsource customer, and related analytics services in the United States. With the latest financial year loss of US$14m and a trailing-twelve-month loss of US$5.9m, the US$204m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Performant Financial will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
See our latest analysis for Performant Financial
Expectations from some of the American Commercial Services analysts is that Performant Financial is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$3.0m in 2022. So, the company is predicted to breakeven just over a year from today. 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 110%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Performant Financial's growth isn’t the focus of this broad overview, however, 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.
Before we wrap up, there’s one issue worth mentioning. Performant Financial currently has a debt-to-equity ratio of 156%. Typically, 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 in investing in the loss-making company.
Next Steps:
There are too many aspects of Performant Financial to cover in one brief article, but the key fundamentals for the company can all be found in one place – Performant Financial's company page on Simply Wall St. We've also put together a list of important factors you should look at:
Valuation: What is Performant Financial 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 Performant Financial 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 Performant Financial’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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