Zip Co Limited's (ASX:Z1P): Zip Co Limited provides point-of-sale credit and digital payment services to consumers and merchants in Australia and New Zealand. The AU$1.5b market-cap company announced a latest loss of -AU$11.1m on 30 June 2019 for its most recent financial year result. Many investors are wondering the rate at which Z1P will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for Z1P, its year of breakeven and its implied growth rate.

Check out our latest analysis for Zip Co

Z1P is bordering on breakeven, according to the 5 Consumer Finance analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$23m in 2021. So, Z1P is predicted to breakeven approximately 2 years from today. How fast will Z1P have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 94% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, I won’t go into details of Z1P’s 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.

Before I wrap up, there’s one issue worth mentioning. Z1P currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and Z1P has considerably exceeded this. 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 Z1P which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at Z1P, take a look at Z1P’s company page on Simply Wall St. I’ve also compiled a list of key aspects you should look at:

1. Valuation: What is Z1P 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 Z1P 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 Zip Co’s board and the CEO’s back ground.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.