Afterpay Touch Group Limited’s (ASX:APT) Path To Profitability

Afterpay Touch Group Limited’s (ASX:APT): Afterpay Holdings Limited operates as a payments company in Australia. The AU$1.84b market-cap company’s loss lessens since it announced a -AU$9.62m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -AU$8.97m, as it approaches breakeven. As path to profitability is the topic on APT’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for APT.

View out our latest analysis for Afterpay Touch Group

Expectation from IT analysts is APT is on the verge of breakeven. They anticipate the company to incur a final loss in 2017, before generating positive profits of AU$6.10m in 2018. So, APT is predicted to breakeven approximately a couple of months from now! What rate will APT have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 96.83%, which signals high confidence from analysts. If this rate turns out to be too aggressive, APT may become profitable much later than analysts predict.

ASX:APT Past Future Earnings June 15th 18
ASX:APT Past Future Earnings June 15th 18

Underlying developments driving APT’s growth isn’t the focus of this broad overview, though, 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.

Before I wrap up, there’s one issue worth mentioning. APT currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in APT’s case is 82.70%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

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

  1. Historical Track Record: What has APT’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 Afterpay Touch Group’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.