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When Will Prospa Group Limited (ASX:PGL) Become Profitable?

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Prospa Group Limited (ASX:PGL) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Prospa Group Limited, a financial technology company, operates as an online lender in Australia. The AU$153m market-cap company announced a latest loss of AU$9.5m on 30 June 2021 for its most recent financial year result. As path to profitability is the topic on Prospa Group's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Prospa Group

Consensus from 2 of the Australian Consumer Finance analysts is that Prospa Group is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$900k in 2024. So, the company is predicted to breakeven approximately 3 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 71% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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

Underlying developments driving Prospa Group's growth isn’t the focus of this broad overview, however, take into account that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Prospa Group is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Prospa Group, so if you are interested in understanding the company at a deeper level, take a look at Prospa Group's company page on Simply Wall St. We've also compiled a list of key factors you should further research:

  1. Historical Track Record: What has Prospa Group's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Prospa Group'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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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