Rambus Inc. (NASDAQ:RMBS) Has Found A Path To Profitability

By
Simply Wall St
Published
September 01, 2021
NasdaqGS:RMBS
Source: Shutterstock

We feel now is a pretty good time to analyse Rambus Inc.'s (NASDAQ:RMBS) business as it appears the company may be on the cusp of a considerable accomplishment. Rambus Inc. provides semiconductor products in the United States, Taiwan, South Korea, Japan, Europe, Canada, Singapore, Asia, and internationally. The US$2.6b market-cap company posted a loss in its most recent financial year of US$40m and a latest trailing-twelve-month loss of US$16m shrinking the gap between loss and breakeven. The most pressing concern for investors is Rambus' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Rambus

Consensus from 4 of the American Semiconductor analysts is that Rambus is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$23m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 69% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:RMBS Earnings Per Share Growth September 2nd 2021

We're not going to go through company-specific developments for Rambus given that this is a high-level summary, but, bear in mind that typically 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 aspect worth mentioning. The company has managed its capital prudently, with debt making up 19% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is Rambus 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 Rambus 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 Rambus’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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