With the business potentially at an important milestone, we thought we'd take a closer look at Funding Circle Holdings plc's (LON:FCH) future prospects. Funding Circle Holdings plc, together with its subsidiaries, provides online lending platforms in the United Kingdom, the United States, and internationally. On 31 December 2020, the UK£537m market-cap company posted a loss of UK£108m for its most recent financial year. As path to profitability is the topic on Funding Circle Holdings' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Consensus from 4 of the British Consumer Finance analysts is that Funding Circle Holdings is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of UK£24m in 2021. The company is therefore projected to breakeven around 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 92% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Funding Circle Holdings given that this is a high-level summary, however, keep in mind that generally 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. Funding Circle Holdings currently has a 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. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are key fundamentals of Funding Circle Holdings 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 Funding Circle Holdings, take a look at Funding Circle Holdings' company page on Simply Wall St. We've also put together a list of important aspects you should look at:
- Historical Track Record: What has Funding Circle Holdings' 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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Funding Circle Holdings' board and the CEO’s background.
- 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.
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