Market Sentiment Around Loss-Making Axis Auto Finance Inc. (CVE:AXIS)

Axis Auto Finance Inc. (CVE:AXIS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Axis Auto Finance Inc. provides non-standard auto financing solutions to Canadians who do not qualify for traditional bank financing. The CA$35m market-cap company’s loss lessened since it announced a CA$3.9m loss in the full financial year, compared to the latest trailing-twelve-month loss of CA$2.4m, as it approaches breakeven. Many investors are wondering about the rate at which Axis Auto Finance will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Axis Auto Finance

Axis Auto Finance is bordering on breakeven, according to some Canadian Consumer Finance analysts. They expect the company to post a final loss in 2020, before turning a profit of CA$5.6m in 2021. So, the company is predicted to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 188% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Axis Auto Finance's upcoming projects, however, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Axis Auto Finance is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Axis Auto Finance 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 Axis Auto Finance, take a look at Axis Auto Finance's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:

1. Historical Track Record: What has Axis Auto Finance's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Axis Auto Finance'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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