Zip Co Limited (ASX:Z1P): When Will It Breakeven?

Zip Co Limited's (ASX:Z1P): Zip Co Limited provides point-of-sale credit and digital payment services to consumers and merchants primarily in Australia. With the latest financial year loss of -AU$20.19m and a trailing-twelve month of -AU$28.84m, the AU$255.69m market-cap amplifies its loss by moving further away from its breakeven target. As path to profitability is the topic on Z1P’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for Z1P, its year of breakeven and its implied growth rate.

View our latest analysis for Zip Co

Z1P is bordering on breakeven, according to Consumer Finance analysts. They anticipate the company to incur a final loss in 2019, before generating positive profits of AU$5.45m in 2020. So, Z1P is predicted to breakeven approximately a few months 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 88.78% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, I won’t go into details of Z1P’s upcoming projects, but, take into account that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing I would like to bring into light with Z1P is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in Z1P’s case, it has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Z1P which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at Z1P, 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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.