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Softchoice Corporation (TSE:SFTC) On The Verge Of Breaking Even

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·3 min read
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Softchoice Corporation (TSE:SFTC) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Softchoice Corporation designs, procures, implements, and manages information technology (IT) environment solutions in the United States and Canada. With the latest financial year loss of US$12m and a trailing-twelve-month loss of US$6.0m, the CA$1.4b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Softchoice's path to profitability – when will it 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 Softchoice

Softchoice is bordering on breakeven, according to the 7 Canadian Electronic analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$47m in 2022. So, the company is predicted to breakeven approximately a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 17% is expected, which is relatively reasonable. However, if this rate turns out to be too buoyant, the company may become profitable later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving Softchoice's growth isn’t the focus of this broad overview, 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 we wrap up, there’s one issue worth mentioning. Softchoice currently has a debt-to-equity ratio of 183%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Softchoice which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Softchoice, take a look at Softchoice's company page on Simply Wall St. We've also compiled a list of important aspects you should further research:

  1. Valuation: What is Softchoice 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 Softchoice 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 Softchoice’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.

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