With the business potentially at an important milestone, we thought we'd take a closer look at Wayfair Inc.'s (NYSE:W) future prospects. Wayfair Inc. engages in the e-commerce business in the United States and internationally. The US$29b market-cap company posted a loss in its most recent financial year of US$985m and a latest trailing-twelve-month loss of US$169m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Wayfair will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
According to the 29 industry analysts covering Wayfair, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$152m in 2022. The company is therefore projected to breakeven just over a year 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 48%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Wayfair given that this is a high-level summary, but, take into account that typically 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 Wayfair is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.
This article is not intended to be a comprehensive analysis on Wayfair, so if you are interested in understanding the company at a deeper level, take a look at Wayfair's company page on Simply Wall St. We've also put together a list of relevant factors you should further research:
- Valuation: What is Wayfair 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 Wayfair is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Wayfair’s board and the CEO’s background.
- 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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