Breakeven On The Horizon For Xponential Fitness, Inc. (NYSE:XPOF)

Xponential Fitness, Inc. (NYSE:XPOF) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Xponential Fitness, Inc., through its subsidiaries, operates as a boutique fitness franchisor in the United States and internationally. The US$811m market-cap company posted a loss in its most recent financial year of US$14m and a latest trailing-twelve-month loss of US$20m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Xponential Fitness 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.

See our latest analysis for Xponential Fitness

Xponential Fitness is bordering on breakeven, according to the 7 American Hospitality analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$32m in 2022. Therefore, the company is expected 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 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 57% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Xponential Fitness given that this is a high-level summary, though, bear in mind that generally 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 Xponential Fitness is its debt-to-equity ratio of over 2x. 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 Xponential Fitness, so if you are interested in understanding the company at a deeper level, take a look at Xponential Fitness' company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

1. Valuation: What is Xponential Fitness 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 Xponential Fitness 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 Xponential Fitness’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.

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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