American Finance Trust, Inc. (NASDAQ:AFIN): When Will It Breakeven?

By
Simply Wall St
Published
January 13, 2022
NasdaqGS:RTL
Source: Shutterstock

American Finance Trust, Inc. (NASDAQ:AFIN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. American Finance Trust, Inc. (Nasdaq: AFIN) is a publicly traded real estate investment trust listed on the Nasdaq focused on acquiring and managing a diversified portfolio of primarily service-oriented and traditional retail and distribution related commercial real estate properties in the U.S. With the latest financial year loss of US$47m and a trailing-twelve-month loss of US$32m, the US$1.1b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is American Finance Trust's 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.

Check out our latest analysis for American Finance Trust

According to the 2 industry analysts covering American Finance Trust, the consensus is that breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of US$3.8m in 2024. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:AFIN Earnings Per Share Growth January 13th 2022

We're not going to go through company-specific developments for American Finance Trust 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.

Before we wrap up, there’s one issue worth mentioning. American Finance Trust currently has a debt-to-equity ratio of 100%. 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 in investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is American Finance Trust 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 American Finance Trust 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 American Finance Trust’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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