PayGroup Limited (ASX:PYG) Is About To Turn The Corner

By
Simply Wall St
Published
January 20, 2022
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 company’s loss has recently broadened since it announced a AU$511k loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$727k, moving it further away from breakeven. The most pressing concern for investors is PayGroup'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 PayGroup

PayGroup is bordering on breakeven, according to some Australian Software analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$1.0m in 2022. The company is therefore projected to breakeven around 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 143% is expected, which signals high confidence from analysts. 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 January 20th 2022

We're not going to go through company-specific developments for PayGroup given that this is a high-level summary, though, 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 PayGroup has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

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 essential factors 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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