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Megaport Limited's (ASX:MP1) Profit Outlook

Simply Wall St

Megaport Limited's (ASX:MP1): Megaport Limited provides elastic interconnection services to the enterprises and service providers in Australia, the Asia-Pacific, North America, and Europe. With the latest financial year loss of -AU$33.6m and a trailing-twelve month of -AU$33.6m, the AU$1.2b market-cap alleviates its loss by moving closer towards its target of breakeven. As path to profitability is the topic on MP1’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for MP1, its year of breakeven and its implied growth rate.

See our latest analysis for Megaport

According to the 5 industry analysts covering MP1, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$716k in 2022. Therefore, MP1 is expected to breakeven roughly 3 years from today. What rate will MP1 have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 51%, which is rather optimistic! If this rate turns out to be too aggressive, MP1 may become profitable much later than analysts predict.

ASX:MP1 Past and Future Earnings, September 26th 2019

I’m not going to go through company-specific developments for MP1 given that this is a high-level summary, but, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before I wrap up, there’s one aspect worth mentioning. MP1 has managed its capital prudently, with debt making up 2.3% of equity. This means that MP1 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 too many aspects of MP1 to cover in one brief article, but the key fundamentals for the company can all be found in one place – MP1’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further examine:

  1. Historical Track Record: What has MP1's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  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 back ground.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.