When Can We Expect A Profit From Redfin Corporation (NASDAQ:RDFN)?

By
Simply Wall St
Published
July 15, 2021
NasdaqGS:RDFN
Source: Shutterstock

We feel now is a pretty good time to analyse Redfin Corporation's (NASDAQ:RDFN) business as it appears the company may be on the cusp of a considerable accomplishment. Redfin Corporation operates as a residential real estate brokerage company in the United States and Canada. The US$5.8b market-cap company’s loss lessened since it announced a US$23m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$984k, as it approaches breakeven. As path to profitability is the topic on Redfin's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Redfin

Consensus from 16 of the American Real Estate analysts is that Redfin is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$41m in 2023. So, the company is predicted to breakeven approximately 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 83% is expected, 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:RDFN Earnings Per Share Growth July 16th 2021

Underlying developments driving Redfin's growth isn’t the focus of this broad overview, however, keep in mind that by and large 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 Redfin 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. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

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

  1. Historical Track Record: What has Redfin's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Redfin'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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