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7digital Group plc (LON:7DIG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. 7digital Group plc operates as a digital music technology company in the United Kingdom, the United States, Germany, rest of Europe, and internationally. On 31 December 2020, the UK£24m market-cap company posted a loss of UK£2.3m for its most recent financial year. The most pressing concern for investors is 7digital Group's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
According to some industry analysts covering 7digital Group, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of UK£2.6m in 2022. So, the company is predicted to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 98% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for 7digital Group given that this is a high-level summary, 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 we wrap up, there’s one issue worth mentioning. 7digital Group currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.
This article is not intended to be a comprehensive analysis on 7digital Group, so if you are interested in understanding the company at a deeper level, take a look at 7digital Group's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:
Historical Track Record: What has 7digital Group's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on 7digital Group's board and the CEO’s background.
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.
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.
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