We feel now is a pretty good time to analyse Dropsuite Limited's (ASX:DSE) business as it appears the company may be on the cusp of a considerable accomplishment. Dropsuite Limited operates a cloud-based software platform worldwide. On 31 December 2020, the AU$119m market-cap company posted a loss of AU$2.1m for its most recent financial year. As path to profitability is the topic on Dropsuite's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
See our latest analysis for Dropsuite
Dropsuite is bordering on breakeven, according to some Australian Software analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$1.3m in 2022. So, the company is predicted to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 103%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Dropsuite's growth isn’t the focus of this broad overview, but, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we’d like to point out is that Dropsuite 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. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Dropsuite, so if you are interested in understanding the company at a deeper level, take a look at Dropsuite's company page on Simply Wall St. We've also put together a list of relevant aspects you should look at:
- Valuation: What is Dropsuite 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 Dropsuite is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Dropsuite’s board and the CEO’s background.
- 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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About ASX:DSE
Flawless balance sheet with reasonable growth potential.
