Barnes & Noble Education, Inc.'s (NYSE:BNED) Shift From Loss To Profit

By
Simply Wall St
Published
April 29, 2021
NYSE:BNED
Source: Shutterstock

With the business potentially at an important milestone, we thought we'd take a closer look at Barnes & Noble Education, Inc.'s (NYSE:BNED) future prospects. Barnes & Noble Education, Inc. operates bookstores for college and university campuses, and K-12 institutions in the United States. With the latest financial year loss of US$38m and a trailing-twelve-month loss of US$128m, the US$406m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Barnes & Noble Education will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Barnes & Noble Education

Consensus from 2 of the American Specialty Retail analysts is that Barnes & Noble Education is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$8.7m in 2023. The company is therefore projected to breakeven around 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 98% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
NYSE:BNED Earnings Per Share Growth April 29th 2021

We're not going to go through company-specific developments for Barnes & Noble Education given that this is a high-level summary, however, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. Barnes & Noble Education currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Barnes & Noble Education's case is 44%. 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 key fundamentals of Barnes & Noble Education which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Barnes & Noble Education, take a look at Barnes & Noble Education's company page on Simply Wall St. We've also put together a list of key factors you should further research:

  1. Valuation: What is Barnes & Noble Education 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 Barnes & Noble Education 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 Barnes & Noble Education’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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