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VNET Group, Inc. (NASDAQ:VNET) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. VNET Group, Inc., an investment holding company, provides hosting and related services to Internet companies, government entities, blue-chip enterprises, and small-to mid-sized enterprises in the People’s Republic of China. The US$1.0b market-cap company’s loss lessened since it announced a CN¥3.2b loss in the full financial year, compared to the latest trailing-twelve-month loss of CN¥511m, as it approaches breakeven. Many investors are wondering about the rate at which VNET Group will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
According to the 12 industry analysts covering VNET Group, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of CN¥219m in 2024. The company is therefore projected to breakeven around 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 17% year-on-year, on average, which seems realistic. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of VNET Group's upcoming projects, however, bear in mind that typically 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. VNET Group currently has a debt-to-equity ratio of 118%. Typically, 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 in investing in the loss-making company.
There are too many aspects of VNET Group to cover in one brief article, but the key fundamentals for the company can all be found in one place – VNET Group's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:
Valuation: What is VNET Group 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 VNET Group 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 VNET Group’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.
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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.