We feel now is a pretty good time to analyse ADT Inc.'s (NYSE:ADT) business as it appears the company may be on the cusp of a considerable accomplishment. ADT Inc. provides security, automation, and smart home solutions to consumer and business customers in the United States. The US$6.3b market-cap company’s loss lessened since it announced a US$341m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$241m, as it approaches breakeven. As path to profitability is the topic on ADT's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
ADT is bordering on breakeven, according to the 5 American Consumer Services analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$43m in 2023. Therefore, the company is expected to breakeven just over a year from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 109% is expected, which is extremely buoyant. 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 ADT given that this is a high-level summary, but, bear in mind that typically 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. ADT currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company 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.
There are too many aspects of ADT to cover in one brief article, but the key fundamentals for the company can all be found in one place – ADT's company page on Simply Wall St. We've also put together a list of important aspects you should further research:
Valuation: What is ADT 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 ADT is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on ADT’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.
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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.