When Can We Expect A Profit From ReadCloud Limited (ASX:RCL)?

With the business potentially at an important milestone, we thought we'd take a closer look at ReadCloud Limited's (ASX:RCL) future prospects. ReadCloud Limited provides eLearning software and industry-based training solutions to schools and educational institutions in Australia. On 30 September 2024, the AU$16m market-cap company posted a loss of AU$1.0m for its most recent financial year. Many investors are wondering about the rate at which ReadCloud 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.

ReadCloud is bordering on breakeven, according to some Australian Software analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of AU$700k in 2026. So, the company is predicted 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 98%, 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.

We're not going to go through company-specific developments for ReadCloud given that this is a high-level summary, though, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Check out our latest analysis for ReadCloud

One thing we’d like to point out is that ReadCloud has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect 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 compiled a list of pertinent aspects you should look at:

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.