Redbubble Limited's (ASX:RBL) About To Shift From Loss To Profit

With the business potentially at an important milestone, we thought we'd take a closer look at Redbubble Limited's (ASX:RBL) future prospects. Redbubble Limited operates as an online marketplace that facilitates the sale and purchase of art and designs on a range of products between independent creatives and consumers. On 30 June 2020, the AU$1.7b market-cap company posted a loss of AU$8.8m for its most recent financial year. Many investors are wondering about the rate at which Redbubble will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Redbubble

Redbubble is bordering on breakeven, according to the 4 Australian Online Retail analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$33m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 54%, 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 Redbubble's upcoming projects, but, bear in mind that typically 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 aspect worth mentioning. Redbubble currently has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of Redbubble which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Redbubble, take a look at Redbubble's company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:

1. Valuation: What is Redbubble 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 Redbubble 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 Redbubble’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. 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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