Motorsport Games Inc. (NASDAQ:MSGM): When Will It Breakeven?

We feel now is a pretty good time to analyse Motorsport Games Inc.'s (NASDAQ:MSGM) business as it appears the company may be on the cusp of a considerable accomplishment. Motorsport Games Inc. develops and publishes multi-platform racing video games in the United States. The US$345m market-cap company announced a latest loss of US$1.8m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is Motorsport Games' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Motorsport Games

According to the 2 industry analysts covering Motorsport Games, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$7.9m in 2023. So, the company is predicted to breakeven approximately 2 years 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 69%, which is rather optimistic! 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 Motorsport Games given that this is a high-level summary, however, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Motorsport Games is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Motorsport Games to cover in one brief article, but the key fundamentals for the company can all be found in one place – Motorsport Games' company page on Simply Wall St. We've also put together a list of important factors you should further examine:

1. Valuation: What is Motorsport Games 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 Motorsport Games 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 Motorsport Games’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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