With the business potentially at an important milestone, we thought we'd take a closer look at Megaport Limited's (ASX:MP1) future prospects. Megaport Limited provides elastic interconnection services to the enterprises and service providers in Australia, New Zealand, Hong Kong, Singapore, Japan, North America, and Europe. On 30 June 2023, the AU$1.9b market-cap company posted a loss of AU$9.8m for its most recent financial year. Many investors are wondering about the rate at which Megaport 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.
According to the 14 industry analysts covering Megaport, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$13m in 2024. Therefore, the company is expected to breakeven roughly a year 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 45%, 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.
Underlying developments driving Megaport's growth isn’t the focus of this broad overview, 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 aspect worth mentioning. The company has managed its capital prudently, with debt making up 12% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
There are key fundamentals of Megaport 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 Megaport, take a look at Megaport's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further research:
Valuation: What is Megaport 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 Megaport 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 Megaport’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.