Breakeven On The Horizon For PayGroup Limited (ASX:PYG)

By
Simply Wall St
Published
May 18, 2021
ASX:PYG
Source: Shutterstock

With the business potentially at an important milestone, we thought we'd take a closer look at PayGroup Limited's (ASX:PYG) future prospects. PayGroup Limited provides payroll and human capital management solutions in the Asia Pacific and the Middle East. The AU$52m market-cap company’s loss lessened since it announced a AU$2.1m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$185k, as it approaches breakeven. As path to profitability is the topic on PayGroup's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for PayGroup

Expectations from some of the Australian Software analysts is that PayGroup is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of AU$100k in 2022. So, the company is predicted to breakeven just over a year 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 137% 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:PYG Earnings Per Share Growth May 19th 2021

Underlying developments driving PayGroup's growth isn’t the focus of this broad overview, 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 judiciously, with debt making up 0.5% 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:

There are key fundamentals of PayGroup which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at PayGroup, take a look at PayGroup's company page on Simply Wall St. We've also compiled a list of important aspects you should further research:

  1. Valuation: What is PayGroup 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 PayGroup 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 PayGroup’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.

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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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