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With the business potentially at an important milestone, we thought we'd take a closer look at Performant Financial Corporation's (NASDAQ:PFMT) future prospects. Performant Financial Corporation provides technology-enabled audit, recovery, outsource customer, and related analytics services in the United States. The US$188m market-cap company posted a loss in its most recent financial year of US$14m and a latest trailing-twelve-month loss of US$3.9m shrinking the gap between loss and breakeven. The most pressing concern for investors is Performant Financial's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Performant Financial is bordering on breakeven, according to the 2 American Commercial Services analysts. They expect the company to post a final loss in 2022, before turning a profit of US$10m in 2023. The company is therefore projected to breakeven around 2 years from now. 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 99% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Performant Financial's growth isn’t the focus of this broad overview, however, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. Performant Financial currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Performant Financial's case is 57%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are key fundamentals of Performant Financial which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Performant Financial, take a look at Performant Financial's company page on Simply Wall St. We've also compiled a list of important aspects 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.