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Megaport Limited's (ASX:MP1) Profit Outlook

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·3 min read
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With the business potentially at an important milestone, we thought we'd take a closer look at Megaport Limited's (ASX:MP1) future prospects. Megaport Limited provides elastic interconnection services to the enterprises and service providers in Australia, New Zealand, Hong Kong, Singapore, Japan, North America, and Europe. The AU$2.1b market-cap company posted a loss in its most recent financial year of AU$48m and a latest trailing-twelve-month loss of AU$67m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Megaport's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Megaport

Megaport is bordering on breakeven, according to the 10 Australian IT analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$5.3m in 2023. So, the company is predicted to breakeven approximately 2 years 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 69%, which signals high confidence from analysts. 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

Underlying developments driving Megaport's growth isn’t the focus of this broad overview, though, take into account that by and large 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 aspect worth mentioning. The company has managed its capital judiciously, with debt making up 3.8% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Megaport 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 Megaport, take a look at Megaport's company page on Simply Wall St. We've also put together a list of important aspects you should look at:

  1. Valuation: What is Megaport 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 Megaport 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 Megaport’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 (at) simplywallst.com.