When Will ReadCloud Limited (ASX:RCL) Become Profitable?

We feel now is a pretty good time to analyse ReadCloud Limited's (ASX:RCL) business as it appears the company may be on the cusp of a considerable accomplishment. ReadCloud Limited provides eLearning software and industry-based training solutions to schools and educational institutions in Australia. The AU$12m market-cap company’s loss lessened since it announced a AU$2.3m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$1.6m, as it approaches breakeven. The most pressing concern for investors is ReadCloud's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for ReadCloud

ReadCloud is bordering on breakeven, according to some Australian Software analysts. They expect the company to post a final loss in 2025, before turning a profit of AU$700k in 2026. Therefore, the company is expected to breakeven roughly 2 years from now. 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 90%, 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.

Given this is a high-level overview, we won’t go into details of ReadCloud's upcoming projects, but, keep in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that ReadCloud has no debt on its balance sheet, which is rare for a loss-making 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 key fundamentals of ReadCloud 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 ReadCloud, take a look at ReadCloud's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:

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.