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We feel now is a pretty good time to analyse Wayfair Inc.'s (NYSE:W) business as it appears the company may be on the cusp of a considerable accomplishment. Wayfair Inc. engages in the e-commerce business in the United States and internationally. The US$30b market-cap company’s loss lessened since it announced a US$985m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$169m, as it approaches breakeven. Many investors are wondering about the rate at which Wayfair 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.
Wayfair is bordering on breakeven, according to the 28 American Online Retail analysts. They expect the company to post a final loss in 2021, before turning a profit of US$156m in 2022. The company is therefore projected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 48% year-on-year, on average, 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.
We're not going to go through company-specific developments for Wayfair given that this is a high-level summary, but, take into account that typically 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. Wayfair currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. Oftentimes, losses exist only on paper but other times, it can be a red flag.
There are key fundamentals of Wayfair 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 Wayfair, take a look at Wayfair's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further examine:
Valuation: What is Wayfair 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 Wayfair 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 Wayfair’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. 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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