We feel now is a pretty good time to analyse Chegg, Inc.'s (NYSE:CHGG) business as it appears the company may be on the cusp of a considerable accomplishment. Chegg, Inc. operates direct-to-student learning platform that supports students on their journey from high school to college and into their career with tools designed to help them pass their test, pass their class, and save money on required materials. The US$10b market-cap company posted a loss in its most recent financial year of US$9.6m and a latest trailing-twelve-month loss of US$24m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Chegg's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Chegg is bordering on breakeven, according to the 16 American Consumer Services analysts. They expect the company to post a final loss in 2020, before turning a profit of US$74m in 2021. The company is therefore projected to breakeven just over a year 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 81% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Chegg's growth isn’t the focus of this broad overview, but, bear in mind that typically 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. Chegg currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of Chegg to cover in one brief article, but the key fundamentals for the company can all be found in one place – Chegg's company page on Simply Wall St. We've also compiled a list of important aspects you should look at:
- Valuation: What is Chegg 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 Chegg is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Chegg’s 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.
If you’re looking to trade Chegg, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.