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Loss-Making Vasta Platform Limited (NASDAQ:VSTA) Set To Breakeven

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We feel now is a pretty good time to analyse Vasta Platform Limited's (NASDAQ:VSTA) business as it appears the company may be on the cusp of a considerable accomplishment. Vasta Platform Limited, an education company, provides educational and digital solutions to private schools operating in the K-12 educational sector in Brazil. With the latest financial year loss of R$61m and a trailing-twelve-month loss of R$48m, the US$950m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Vasta Platform will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Vasta Platform

According to the 5 industry analysts covering Vasta Platform, the consensus is that breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of R$67m in 2020. 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 61% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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

We're not going to go through company-specific developments for Vasta Platform given that this is a high-level summary, though, bear in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Vasta Platform is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Vasta Platform's case is 59%. 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 Vasta Platform to cover in one brief article, but the key fundamentals for the company can all be found in one place – Vasta Platform's company page on Simply Wall St. We've also put together a list of key factors you should further research:

  1. Valuation: What is Vasta Platform 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 Vasta Platform 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 Vasta Platform’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.

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.

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