Loss-Making Performant Financial Corporation (NASDAQ:PFMT) Expected To Breakeven In The Medium-Term

By
Simply Wall St
Published
June 27, 2021
NasdaqGS:PFMT
Source: Shutterstock

With the business potentially at an important milestone, we thought we'd take a closer look at Performant Financial Corporation's (NASDAQ:PFMT) future prospects. Performant Financial Corporation provides technology-enabled audit, recovery, outsource customer, and related analytics services in the United States. The US$204m market-cap company’s loss lessened since it announced a US$14m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$5.9m, as it approaches breakeven. As path to profitability is the topic on Performant Financial's investors mind, we've decided to gauge market sentiment. 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 Performant Financial

Expectations from some of the American Commercial Services analysts is that Performant Financial is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$3.0m in 2022. So, the company is predicted to breakeven just over a year 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 110%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:PFMT Earnings Per Share Growth June 28th 2021

Underlying developments driving Performant Financial's growth isn’t the focus of this broad overview, but, bear 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.

Before we wrap up, there’s one issue worth mentioning. Performant Financial currently has a debt-to-equity ratio of 156%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Performant Financial, so if you are interested in understanding the company at a deeper level, take a look at Performant Financial's company page on Simply Wall St. We've also compiled a list of key factors you should further research:

  1. Valuation: What is Performant Financial 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 Performant Financial 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 Performant Financial’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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