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Loss-Making Sterling Check Corp. (NASDAQ:STER) Set To Breakeven

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·3 min read
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Sterling Check Corp. (NASDAQ:STER) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Sterling Check Corp. provides technology-enabled background and identity verification services in the United States, Canada, Europe, the Middle East and Africa, and the Asia Pacific. The US$1.9b market-cap company’s loss lessened since it announced a US$19m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$13m, as it approaches breakeven. As path to profitability is the topic on Sterling Check's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Sterling Check

Consensus from 8 of the American Professional Services analysts is that Sterling Check is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$45m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 95% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

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

We're not going to go through company-specific developments for Sterling Check given that this is a high-level summary, but, take into account that generally 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. Sterling Check currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Sterling Check's case is 70%. 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 Sterling Check to cover in one brief article, but the key fundamentals for the company can all be found in one place – Sterling Check's company page on Simply Wall St. We've also compiled a list of key factors you should look at:

  1. Valuation: What is Sterling Check 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 Sterling Check 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 Sterling Check’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.

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

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.

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