When Will Xref Limited (ASX:XF1) Turn A Profit?
With the business potentially at an important milestone, we thought we'd take a closer look at Xref Limited's (ASX:XF1) future prospects. Xref Limited engages in the development of human resources technology that automates the candidate reference process for employers. The AU$32m market-cap company announced a latest loss of AU$10m on 30 June 2020 for its most recent financial year result. Many investors are wondering about the rate at which Xref will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
See our latest analysis for Xref
Xref is bordering on breakeven, according to some Australian Software analysts. They expect the company to post a final loss in 2022, before turning a profit of AU$160k in 2023. The company is therefore projected to breakeven around 3 years from today. 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 85% is expected, 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.
Given this is a high-level overview, we won’t go into details of Xref's upcoming projects, however, bear in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. Xref 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. Oftentimes, losses exist only on paper but other times, it can be a red flag.
Next Steps:
There are key fundamentals of Xref which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Xref, take a look at Xref's company page on Simply Wall St. We've also put together a list of relevant factors you should further examine:
Historical Track Record: What has Xref'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 Xref'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. 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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