Groupon, Inc. (NASDAQ:GRPN) Could Be Less Than A Year Away From Profitability

We feel now is a pretty good time to analyse Groupon, Inc.'s (NASDAQ:GRPN) business as it appears the company may be on the cusp of a considerable accomplishment. Groupon, Inc. operates a marketplace that connects consumers to merchants by offering goods and services at a discount in North America and international. The US$1.3b market-cap company’s loss lessened since it announced a US$59m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$39m, as it approaches breakeven. As path to profitability is the topic on Groupon's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

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Consensus from 4 of the American Multiline Retail analysts is that Groupon is on the verge of breakeven. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$12m in 2025. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 73% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Groupon's upcoming projects, though, 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.

See our latest analysis for Groupon

Before we wrap up, there’s one issue worth mentioning. Groupon currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is 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 Groupon to cover in one brief article, but the key fundamentals for the company can all be found in one place – Groupon's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:

1. Valuation: What is Groupon 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 Groupon 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 Groupon’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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.