Virgin Australia Holdings Limited's (ASX:VAH): Virgin Australia Holdings Limited engages in the operation of domestic and international passenger and cargo airline business in Australia. On 30 June 2019, the AU$1.3b market-cap posted a loss of -AU$349.1m for its most recent financial year. As path to profitability is the topic on VAH’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for VAH, its year of breakeven and its implied growth rate.

Check out our latest analysis for Virgin Australia Holdings

According to the 4 industry analysts covering VAH, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$12m in 2021. So, VAH is predicted to breakeven approximately 2 years from today. What rate will VAH have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 98%, which is extremely buoyant. If this rate turns out to be too aggressive, VAH may become profitable much later than analysts predict.

Underlying developments driving VAH’s growth isn’t the focus of this broad overview, but, 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.

Before I wrap up, there’s one issue worth mentioning. VAH currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in VAH’s case, it has significantly overshot. 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 key fundamentals of VAH 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 VAH, take a look at VAH’s company page on Simply Wall St. I’ve also put together a list of key factors you should further research:

1. Valuation: What is VAH 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 VAH 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 Virgin Australia Holdings’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.

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.

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