Medallion Financial Corp. (NASDAQ:MFIN) Could Be Less Than A Year Away From Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Medallion Financial Corp.'s (NASDAQ:MFIN) future prospects. Medallion Financial Corp., together with its subsidiaries, operates as a finance company in the United States. The US$175m market-cap company announced a latest loss of US$35m on 31 December 2020 for its most recent financial year result. As path to profitability is the topic on Medallion 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 Medallion Financial

Medallion Financial is bordering on breakeven, according to the 3 American Consumer Finance analysts. They expect the company to post a final loss in 2020, before turning a profit of US$25m in 2021. So, the company is predicted to breakeven approximately a year 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 118% 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.

Given this is a high-level overview, we won’t go into details of Medallion Financial's upcoming projects, however, keep 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 Medallion Financial is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is 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 in investing in the loss-making company.

Next Steps:

There are too many aspects of Medallion Financial to cover in one brief article, but the key fundamentals for the company can all be found in one place – Medallion Financial's company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:

1. Historical Track Record: What has Medallion Financial'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 Medallion 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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