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With the business potentially at an important milestone, we thought we'd take a closer look at StarTek, Inc.'s (NYSE:SRT) future prospects. StarTek, Inc., a business process outsourcing company, provides omni-channel customer experience, digital transformation, and technology services in various markets. The US$248m market-cap company posted a loss in its most recent financial year of US$39m and a latest trailing-twelve-month loss of US$12m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which StarTek 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.
StarTek is bordering on breakeven, according to the 2 American IT analysts. They expect the company to post a final loss in 2020, before turning a profit of US$374k in 2021. The company is therefore projected to breakeven around 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 185%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of StarTek's upcoming projects, however, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. StarTek currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in StarTek's case is 71%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are too many aspects of StarTek to cover in one brief article, but the key fundamentals for the company can all be found in one place – StarTek's company page on Simply Wall St. We've also compiled a list of key aspects you should look at:
Valuation: What is StarTek 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 StarTek is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on StarTek’s board and the CEO’s background.
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. 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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