TPG Telecom Limited's (ASX:TPG) About To Shift From Loss To Profit

With the business potentially at an important milestone, we thought we'd take a closer look at TPG Telecom Limited's (ASX:TPG) future prospects. TPG Telecom Limited provides telecommunications services. The AU$14b market-cap company’s loss lessened since it announced a AU$279m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$43m, as it approaches breakeven. As path to profitability is the topic on TPG Telecom'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.

See our latest analysis for TPG Telecom

According to the 11 industry analysts covering TPG Telecom, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$357m in 2021. The company is therefore projected to breakeven around a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 25% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving TPG Telecom's growth isn’t the focus of this broad overview, but, bear in mind that typically 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 issue worth mentioning. TPG Telecom currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in TPG Telecom's case is 82%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of TPG Telecom 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 TPG Telecom, take a look at TPG Telecom's company page on Simply Wall St. We've also put together a list of relevant factors you should further research:

1. Valuation: What is TPG Telecom 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 TPG Telecom 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 TPG Telecom’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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