Analysts Expect Zip Co Limited (ASX:ZIP) To Breakeven Soon

With the business potentially at an important milestone, we thought we'd take a closer look at Zip Co Limited's (ASX:ZIP) future prospects. Zip Co Limited engages in the provision of digital retail finance and payments solutions to consumers, and small and medium sized merchants (SMEs) in Australia, New Zealand, Canada, and the United States. With the latest financial year loss of AU$336m and a trailing-twelve-month loss of AU$57m, the AU$1.4b market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Zip Co will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Zip Co

Zip Co is bordering on breakeven, according to the 6 Australian Consumer Finance analysts. They expect the company to post a final loss in 2023, before turning a profit of AU$71m in 2024. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 10% year-on-year, on average, which seems relatively fair. However, if this rate turns out to be too buoyant, the company may become profitable later than analysts predict.

Underlying developments driving Zip Co's growth isn’t the focus of this broad overview, though, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. Zip Co currently has a 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 Zip Co, so if you are interested in understanding the company at a deeper level, take a look at Zip Co's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:

1. Historical Track Record: What has Zip Co'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 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.

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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@simplywallst.com