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TPG Telecom Limited's (ASX:TPG) About To Shift From Loss To Profit

·3 min read

TPG Telecom Limited (ASX:TPG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. TPG Telecom Limited provides telecommunications services. The AU$13b market-cap company’s loss lessened since it announced a AU$279m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$43m, as it approaches breakeven. The most pressing concern for investors is TPG Telecom's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for TPG Telecom

According to the 11 industry analysts covering TPG Telecom, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$357m in 2021. Therefore, the company is expected to breakeven roughly a year 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 25% 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.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for TPG Telecom given that this is a high-level summary, though, keep in mind that by and large 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. TPG Telecom currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in TPG Telecom's case is 82%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of TPG Telecom to cover in one brief article, but the key fundamentals for the company can all be found in one place – TPG Telecom's company page on Simply Wall St. We've also put together a list of key aspects you should further research:

  1. Valuation: What is TPG Telecom 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 TPG Telecom 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 TPG Telecom’s board and the CEO’s background.

  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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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