Chegg, Inc. (NYSE:CHGG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Chegg, Inc. operates direct-to-student learning platform that supports students on their journey from high school to college and into their career with tools designed to help them to learn their course materials, succeed in their classes, and save money on required materials. The US$8.9b market-cap company posted a loss in its most recent financial year of US$6.2m and a latest trailing-twelve-month loss of US$44m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Chegg's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Consensus from 18 of the American Consumer Services analysts is that Chegg is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$26m in 2021. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 70% year-on-year, on average, which signals high confidence from analysts. 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 Chegg given that this is a high-level summary, however, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with Chegg is its debt-to-equity ratio of 125%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of Chegg to cover in one brief article, but the key fundamentals for the company can all be found in one place – Chegg's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:
Valuation: What is Chegg 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 Chegg 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 Chegg’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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