Market Sentiment Around Loss-Making D2L Inc. (TSE:DTOL)

We feel now is a pretty good time to analyse D2L Inc.'s (TSE:DTOL) business as it appears the company may be on the cusp of a considerable accomplishment. D2L Inc. cloud-based learning software for higher education institutions, kindergarten to grade 12 schools and districts, and private sector enterprises in Canada, the United States, and rest of world. The CA$460m market-cap company posted a loss in its most recent financial year of US$18m and a latest trailing-twelve-month loss of US$13m shrinking the gap between loss and breakeven. The most pressing concern for investors is D2L'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 D2L

Consensus from 8 of the Canadian Consumer Services analysts is that D2L is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of US$7.0m in 2025. Therefore, the company is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 111% 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.

Underlying developments driving D2L's growth isn’t the focus of this broad overview, however, bear in mind that typically 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 D2L 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 D2L to cover in one brief article, but the key fundamentals for the company can all be found in one place – D2L's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:

1. Valuation: What is D2L 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 D2L 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 D2L’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.