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We feel now is a pretty good time to analyse Ribbon Communications Inc.'s (NASDAQ:RBBN) business as it appears the company may be on the cusp of a considerable accomplishment. Ribbon Communications Inc. provides networked software solutions in the United States, Europe, the Middle East, Africa, Japan, other Asia Pacific, and internationally. The US$995m market-cap company posted a loss in its most recent financial year of US$130m and a latest trailing-twelve-month loss of US$186m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Ribbon Communications' investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
According to the 2 industry analysts covering Ribbon Communications, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$12m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 115% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Ribbon Communications' growth isn’t the focus of this broad overview, though, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with Ribbon Communications is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Ribbon Communications' case is 72%. 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 Ribbon Communications, so if you are interested in understanding the company at a deeper level, take a look at Ribbon Communications' company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further research:
Valuation: What is Ribbon Communications 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 Ribbon Communications 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 Ribbon Communications’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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