Megaport Limited's (ASX:MP1) Shift From Loss To Profit

By
Simply Wall St
Published
May 10, 2022
ASX:MP1
Source: Shutterstock

We feel now is a pretty good time to analyse Megaport Limited's (ASX:MP1) business as it appears the company may be on the cusp of a considerable accomplishment. Megaport Limited provides elastic interconnection services to the enterprises and service providers in Australia, New Zealand, Hong Kong, Singapore, Japan, North America, and Europe. The AU$1.2b market-cap company posted a loss in its most recent financial year of AU$55m and a latest trailing-twelve-month loss of AU$37m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Megaport will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Megaport

According to the 12 industry analysts covering Megaport, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$7.8m in 2024. Therefore, the company is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 71% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
ASX:MP1 Earnings Per Share Growth May 10th 2022

Given this is a high-level overview, we won’t go into details of Megaport's upcoming projects, though, keep in mind that generally 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 judiciously, with debt making up 7.3% 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 Megaport, so if you are interested in understanding the company at a deeper level, take a look at Megaport's company page on Simply Wall St. We've also put together a list of important factors you should further research:

  1. Valuation: What is Megaport 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 Megaport 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 Megaport’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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.