Annaly Capital Management, Inc.'s (NYSE:NLY) Has Found A Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Annaly Capital Management, Inc.'s (NYSE:NLY) future prospects. Annaly Capital Management, Inc., a diversified capital manager, invests in and finances residential and commercial assets. The US$12b market-cap company announced a latest loss of US$1.0b on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Annaly Capital Management 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 Annaly Capital Management

According to the 6 industry analysts covering Annaly Capital Management, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$1.4b in 2021. 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 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 95% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Annaly Capital Management's growth isn’t the focus of this broad overview, but, keep in mind that by and large 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 Annaly Capital Management is its 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. 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 Annaly Capital Management, so if you are interested in understanding the company at a deeper level, take a look at Annaly Capital Management's company page on Simply Wall St. We've also compiled a list of important aspects you should look at:

1. Valuation: What is Annaly Capital Management 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 Annaly Capital Management 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 Annaly Capital Management’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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