With the business potentially at an important milestone, we thought we'd take a closer look at GDS Holdings Limited's (NASDAQ:GDS) future prospects. GDS Holdings Limited, together with its subsidiaries, develops and operates data centers in the People's Republic of China. The US$13b market-cap company posted a loss in its most recent financial year of CN¥500m and a latest trailing-twelve-month loss of CN¥459m shrinking the gap between loss and breakeven. The most pressing concern for investors is GDS Holdings' path to profitability – when will it 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 19 industry analysts covering GDS Holdings, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of CN¥43m in 2021. So, the company is predicted to breakeven just over a year 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 70% 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.
Given this is a high-level overview, we won’t go into details of GDS Holdings' upcoming projects, however, 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.
One thing we would like to bring into light with GDS Holdings is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in GDS Holdings' case is 88%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are key fundamentals of GDS Holdings 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 GDS Holdings, take a look at GDS Holdings' company page on Simply Wall St. We've also put together a list of relevant factors you should further examine:
- Historical Track Record: What has GDS Holdings' 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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on GDS Holdings' 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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