Stock Analysis

Rackspace Technology, Inc. (NASDAQ:RXT): Are Analysts Optimistic?

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NasdaqGS:RXT
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Rackspace Technology, Inc. (NASDAQ:RXT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Rackspace Technology, Inc. operates as a multi cloud technology services company worldwide. The US$4.5b market-cap company announced a latest loss of US$246m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is Rackspace Technology's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Rackspace Technology

According to the 8 industry analysts covering Rackspace Technology, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$22m in 2022. The company is therefore projected to breakeven just over a year from now. 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 110% is expected, 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
NasdaqGS:RXT Earnings Per Share Growth April 16th 2021

Given this is a high-level overview, we won’t go into details of Rackspace Technology's upcoming projects, though, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Rackspace Technology is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. 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 Rackspace Technology to cover in one brief article, but the key fundamentals for the company can all be found in one place – Rackspace Technology's company page on Simply Wall St. We've also compiled a list of important aspects you should further examine:

  1. Valuation: What is Rackspace Technology 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 Rackspace Technology 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 Rackspace Technology’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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