When Can We Expect A Profit From Afterpay Touch Group Limited (ASX:APT)?

Afterpay Touch Group Limited’s (ASX:APT): Afterpay Holdings Limited operates as a payments company in Australia. With the latest financial year loss of -AU$9.62M and a trailing-twelve month of -AU$8.97M, the AU$1.52B market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is APT’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for APT, its year of breakeven and its implied growth rate.

See our latest analysis for Afterpay Touch Group

Expectation from analysts is APT is on the verge of breakeven. They expect the company to post a final loss in 2017, before turning a profit of AU$6.45M 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 95.11%, 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 May 10th 18
ASX:APT Past Future Earnings May 10th 18

Given this is a high-level overview, I won’t go into detail the detail of APT’s upcoming projects, however, bear in mind that by and large 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 APT is its 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 in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on APT, so if you are interested in understanding the company at a deeper level, take a look at APT’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further examine:

  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.