Smartpay Holdings Limited (NZSE:SPY) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Smartpay Holdings Limited designs, develops, and implements technology products, services, and software to merchants and retailers in New Zealand and Australia. The NZ$204m market-cap company announced a latest loss of NZ$15m on 31 March 2021 for its most recent financial year result. Many investors are wondering about the rate at which Smartpay Holdings 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.

View our latest analysis for Smartpay Holdings

Expectations from some of the New Zealander IT analysts is that Smartpay Holdings is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of NZ$5.5m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 82% 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.

Given this is a high-level overview, we won’t go into details of Smartpay Holdings' upcoming projects, but, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Smartpay Holdings is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Smartpay Holdings' case is 66%. 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 Smartpay Holdings, so if you are interested in understanding the company at a deeper level, take a look at Smartpay Holdings' company page on Simply Wall St. We've also put together a list of relevant aspects you should further research:

1. Valuation: What is Smartpay Holdings 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 Smartpay Holdings is currently mispriced by the market.

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