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When Will Ooma, Inc. (NYSE:OOMA) Become Profitable?

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·3 min read
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We feel now is a pretty good time to analyse Ooma, Inc.'s (NYSE:OOMA) business as it appears the company may be on the cusp of a considerable accomplishment. Ooma, Inc. creates connected experiences for businesses and consumers in the United States, Canada, and internationally. The US$462m market-cap company’s loss lessened since it announced a US$2.4m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$2.2m, as it approaches breakeven. Many investors are wondering about the rate at which Ooma will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Ooma

Consensus from 6 of the American Telecom analysts is that Ooma is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$3.6m in 2024. Therefore, the company is expected to breakeven roughly 3 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

We're not going to go through company-specific developments for Ooma given that this is a high-level summary, however, take into account 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 aspect worth mentioning. Ooma currently has no debt on its balance sheet, which is rare for a loss-making growth company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are too many aspects of Ooma to cover in one brief article, but the key fundamentals for the company can all be found in one place – Ooma's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further research:

  1. Valuation: What is Ooma 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 Ooma 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 Ooma’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.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.