Megaport Limited's (ASX:MP1): Megaport Limited provides elastic interconnection services to the enterprises and service providers in Australia, the Asia-Pacific, North America, and Europe. The AU$1.3b market-cap posted a loss in its most recent financial year of -AU$33.6m and a latest trailing-twelve-month loss of -AU$36.0m leading to an even wider gap between loss and breakeven. Many investors are wondering the rate at which MP1 will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for MP1, its year of breakeven and its implied growth rate.

See our latest analysis for Megaport

Consensus from the 10 IT analysts is MP1 is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$17m in 2023. MP1 is therefore projected to breakeven around 3 years from today. In order to meet this breakeven date, I calculated the rate at which MP1 must grow year-on-year. It turns out an average annual growth rate of 61% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, MP1 may become profitable much later than analysts predict.

Given this is a high-level overview, I won’t go into details of MP1’s upcoming projects, though, 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.

One thing I’d like to point out is that MP1 has managed its capital prudently, with debt making up 3.6% of equity. This means that MP1 has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of MP1 to cover in one brief article, but the key fundamentals for the company can all be found in one place – MP1’s company page on Simply Wall St. I’ve also compiled a list of important factors you should further examine:

1. Valuation: What is MP1 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 MP1 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 Megaport’s board and the CEO’s back ground.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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