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Performant Financial Corporation (NASDAQ:PFMT): Is Breakeven Near?

Performant Financial Corporation's (NASDAQ:PFMT): Performant Financial Corporation provides technology-enabled audit, recovery, customer care, and related analytics services in the United States. The US$118m market-cap company announced a latest loss of -US$8.0m on 31 December 2018 for its most recent financial year result. The most pressing concern for investors is PFMT’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for PFMT.

View our latest analysis for Performant Financial

Expectation from Commercial Services analysts is PFMT is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$4.6m in 2021. Therefore, PFMT is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, I calculated the rate at which PFMT must grow year-on-year. It turns out an average annual growth rate of 61% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:PFMT Past and Future Earnings, April 10th 2019
NasdaqGS:PFMT Past and Future Earnings, April 10th 2019

I’m not going to go through company-specific developments for PFMT given that this is a high-level summary, 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. PFMT currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in PFMT’s case is 56%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of PFMT which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at PFMT, take a look at PFMT’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should further examine:

  1. Historical Track Record: What has PFMT'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 Performant Financial’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.

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