We feel now is a pretty good time to analyse LendingClub Corporation's (NYSE:LC) business as it appears the company may be on the cusp of a considerable accomplishment. LendingClub Corporation, operates as a bank holding company for LendingClub Bank, National Association that provides range of financial products and services through a technology-driven platform in the United States. The US$2.4b market-cap company’s loss lessened since it announced a US$188m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$37m, as it approaches breakeven. The most pressing concern for investors is LendingClub's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
LendingClub is bordering on breakeven, according to the 6 American Consumer Finance analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$162m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 39% year-on-year, on average, 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 LendingClub given that this is a high-level summary, however, bear in mind that generally 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. LendingClub currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in LendingClub's case is 67%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of LendingClub to cover in one brief article, but the key fundamentals for the company can all be found in one place – LendingClub's company page on Simply Wall St. We've also put together a list of key factors you should further examine:
- Historical Track Record: What has LendingClub'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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on LendingClub'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.
What are the risks and opportunities for LendingClub?
Trading at 26.2% below our estimate of its fair value
Earnings are forecast to grow 17.02% per year
Shareholders have been diluted in the past year
Profit margins (7.4%) are lower than last year (23.6%)
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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.