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Netlinkz Limited (ASX:NET): Are Analysts Optimistic?

Netlinkz Limited's (ASX:NET): Netlinkz Limited provides cloud network solutions in China. With the latest financial year loss of AU$18.5m and a trailing-twelve month of AU$25.9m, the AU$128m market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which NET will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for NET, its year of breakeven and its implied growth rate.

View our latest analysis for Netlinkz

According to the industry analysts covering NET, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$3.0m in 2021. So, NET is predicted to breakeven approximately a couple of months from now! In order to meet this breakeven date, I calculated the rate at which NET must grow year-on-year. It turns out an average annual growth rate of 90% 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

Given this is a high-level overview, I won’t go into details of NET’s upcoming projects, however, keep 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 I wrap up, there’s one issue worth mentioning. NET currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in NET’s case, it has significantly overshot. 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 NET to cover in one brief article, but the key fundamentals for the company can all be found in one place – NET’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further research:

  1. Valuation: What is NET 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 NET 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 Netlinkz’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.

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.

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