21Vianet Group, Inc. (NASDAQ:VNET) Is Expected To Breakeven In The Near Future

By
Simply Wall St
Published
September 30, 2020
NasdaqGS:VNET

21Vianet Group, Inc. (NASDAQ:VNET) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. 21Vianet Group, Inc. provides carrier and cloud-neutral Internet data center services to Internet companies, government entities, blue-chip enterprises, and small-to mid-sized enterprises in the People’s Republic of China. The US$3.0b market-cap company posted a loss in its most recent financial year of CN¥182m and a latest trailing-twelve-month loss of CN¥2.3b leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which 21Vianet Group will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for 21Vianet Group

Consensus from 8 of the American IT analysts is that 21Vianet Group is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of CN¥205m in 2022. So, the company is predicted to breakeven approximately 2 years 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 79%, 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:VNET Earnings Per Share Growth September 30th 2020

Underlying developments driving 21Vianet Group's growth isn’t the focus of this broad overview, but, take into account that generally 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 21Vianet Group is its debt-to-equity ratio of 150%. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of 21Vianet Group 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 21Vianet Group, take a look at 21Vianet Group's company page on Simply Wall St. We've also put together a list of important factors you should further research:

  1. Valuation: What is 21Vianet Group 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 21Vianet Group 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 21Vianet Group’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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