Loss-Making Q2 Holdings, Inc. (NYSE:QTWO) Set To Breakeven

With the business potentially at an important milestone, we thought we'd take a closer look at Q2 Holdings, Inc.'s (NYSE:QTWO) future prospects. Q2 Holdings, Inc. provides digital solutions to financial institutions, financial technology companies, FinTechs, and alternative finance companies (Alt-FIs) in the United States. With the latest financial year loss of US$39m and a trailing-twelve-month loss of US$20m, the US$5.8b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Q2 Holdings' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

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Consensus from 17 of the American Software analysts is that Q2 Holdings is on the verge of breakeven. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$31m in 2025. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 78% year-on-year, on average, which is extremely buoyant. 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 Q2 Holdings given that this is a high-level summary, though, take into account that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

See our latest analysis for Q2 Holdings

One thing we would like to bring into light with Q2 Holdings is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Q2 Holdings' case is 90%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Q2 Holdings, so if you are interested in understanding the company at a deeper level, take a look at Q2 Holdings' company page on Simply Wall St. We've also compiled a list of key factors you should further research:

1. Valuation: What is Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings’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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.