When Can We Expect A Profit From SmileDirectClub, Inc. (NASDAQ:SDC)?

We feel now is a pretty good time to analyse SmileDirectClub, Inc.'s (NASDAQ:SDC) business as it appears the company may be on the cusp of a considerable accomplishment. SmileDirectClub, Inc. operates a teledentistry platform that provides member's with a customized clear aligner therapy treatment in the United States and internationally. The US$4.5b market-cap company’s loss lessened since it announced a US$115m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$95m, as it approaches breakeven. Many investors are wondering about the rate at which SmileDirectClub will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for SmileDirectClub

Consensus from 13 of the American Medical Equipment analysts is that SmileDirectClub is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$1.8m in 2022. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 74%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of SmileDirectClub's upcoming projects, but, take into account 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 SmileDirectClub is its debt-to-equity ratio of 149%. 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.

Next Steps:

This article is not intended to be a comprehensive analysis on SmileDirectClub, so if you are interested in understanding the company at a deeper level, take a look at SmileDirectClub's company page on Simply Wall St. We've also compiled a list of key aspects you should further examine:

1. Valuation: What is SmileDirectClub 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 SmileDirectClub 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 SmileDirectClub’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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