Breakeven On The Horizon For Zip Co Limited (ASX:Z1P)

Zip Co Limited’s (ASX:Z1P): zipMoney Limited provides point-of-sale credit and digital payment services to consumers and merchants. The company’s loss has recently broadened since it announced a -AU$20.19M loss in the full financial year, compared to the latest trailing-twelve-month loss of -AU$28.84M, moving it further away from breakeven. Many investors are wondering the rate at which Z1P will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for Z1P. See our latest analysis for Zip Co Expectation from analysts is Z1P is on the verge of breakeven. They expect the company to post a final loss in 2019, before turning a profit of AU$5.45M in 2020. Therefore, Z1P is expected to breakeven roughly 2 years from now. How fast will Z1P have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 87.76% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, Z1P may become profitable much later than analysts predict.
ASX:Z1P Past Future Earnings Apr 24th 18
ASX:Z1P Past Future Earnings Apr 24th 18
Given this is a high-level overview, I won’t go into detail the detail of Z1P’s upcoming projects, but, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period. One thing I’d like to point out is that Z1P has no debt on its balance sheet, which is rare for a loss-making company. Although Z1P is in the business of originating and selling loans, leading to borrowed funds on its financial statements, this is for the purposes of operating activities, which is a common industry practice. This means that Z1P has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Z1P, so if you are interested in understanding the company at a deeper level, take a look at Z1P’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further research:
  1. Historical Track Record: What has Z1P’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 Zip Co’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.