TrueCar, Inc.'s (NASDAQ:TRUE) Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at TrueCar, Inc.'s (NASDAQ:TRUE) future prospects. TrueCar, Inc. operates as an internet-based information, technology, and communication services company in the United States. The US$456m market-cap company posted a loss in its most recent financial year of US$20m and a latest trailing-twelve-month loss of US$18m shrinking the gap between loss and breakeven. The most pressing concern for investors is TrueCar's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for TrueCar

According to the 7 industry analysts covering TrueCar, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$1.8m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. 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 66%, which is rather optimistic! 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 TrueCar's upcoming projects, though, keep in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we’d like to point out is that TrueCar has no debt on its balance sheet, which is rare for a loss-making growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is TrueCar 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 TrueCar 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 TrueCar’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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