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Motorsport Games Inc. (NASDAQ:MSGM) Is Expected To Breakeven In The Near Future

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Simply Wall St
·3 min read
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We feel now is a pretty good time to analyse Motorsport Games Inc.'s (NASDAQ:MSGM) business as it appears the company may be on the cusp of a considerable accomplishment. Motorsport Games Inc. develops and publishes multi-platform racing video games in the United States. On 31 December 2020, the US$375m market-cap company posted a loss of US$1.8m for its most recent financial year. Many investors are wondering about the rate at which Motorsport Games will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Motorsport Games

Consensus from 2 of the American Entertainment analysts is that Motorsport Games is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$500k in 2022. So, the company is predicted to breakeven just over a year 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 71%, which is rather optimistic! 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 Motorsport Games 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.

Before we wrap up, there’s one issue worth mentioning. Motorsport Games currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Motorsport Games to cover in one brief article, but the key fundamentals for the company can all be found in one place – Motorsport Games' company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

  1. Valuation: What is Motorsport Games 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 Motorsport Games 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 Motorsport Games’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.