ReadCloud Limited (ASX:RCL): Is Breakeven Near?

By
Simply Wall St
Published
September 26, 2021
ASX:RCL
Source: Shutterstock

ReadCloud Limited (ASX:RCL) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. ReadCloud Limited provides eBook solutions to secondary schools in Australia. The AU$28m market-cap company announced a latest loss of AU$1.2m on 30 June 2021 for its most recent financial year result. As path to profitability is the topic on ReadCloud's investors mind, we've decided to gauge market sentiment. 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 ReadCloud

Expectations from some of the Australian Software analysts is that ReadCloud is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$900k in 2023. Therefore, the company is expected to breakeven roughly 2 years 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 102%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
ASX:RCL Earnings Per Share Growth September 26th 2021

Underlying developments driving ReadCloud's growth isn’t the focus of this broad overview, however, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 3.6% 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 too many aspects of ReadCloud to cover in one brief article, but the key fundamentals for the company can all be found in one place – ReadCloud'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 ReadCloud 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 ReadCloud 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 ReadCloud’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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.