We feel now is a pretty good time to analyse DXN Limited's (ASX:DXN) business as it appears the company may be on the cusp of a considerable accomplishment. DXN Limited engages in the designing, engineering, manufacturing, maintenance, and operation of data centers and related infrastructure in Australia. The AU$18m market-cap company announced a latest loss of AU$13m on 30 June 2020 for its most recent financial year result. The most pressing concern for investors is DXN's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
See our latest analysis for DXN
DXN is bordering on breakeven, according to some Australian IT analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$800k in 2022. Therefore, the company is expected to breakeven just over a year from today. 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 115%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for DXN given that this is a high-level summary, though, take into account 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 The company has managed its capital prudently, with debt making up 23% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on DXN, so if you are interested in understanding the company at a deeper level, take a look at DXN's company page on Simply Wall St. We've also put together a list of important aspects you should further research:
- Valuation: What is DXN 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 DXN 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 DXN’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:DXN
DXN
Engages in the design, manufacture, and operation of data centers in Australia.
Good value slight.
