Zscaler, Inc. (NASDAQ:ZS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Zscaler, Inc. operates as a cloud security company worldwide. On 31 July 2024, the US$29b market-cap company posted a loss of US$58m for its most recent financial year. Many investors are wondering about the rate at which Zscaler will turn a profit, with the big question being "when will the company breakeven?" In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Zscaler is bordering on breakeven, according to the 42 American Software analysts. They expect the company to post a final loss in 2026, before turning a profit of US$35m in 2027. The company is therefore projected to breakeven around 3 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2027? Working backwards from analyst estimates, it turns out that they expect the company to grow 40% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Zscaler given that this is a high-level summary, however, keep in mind that typically 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. Zscaler currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn't exceed 40% of your equity, which in Zscaler's case is 90%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Zscaler, so if you are interested in understanding the company at a deeper level, take a look at Zscaler's company page on Simply Wall St. We've also compiled a list of key aspects you should further examine:
- Valuation: What is Zscaler 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 Zscaler 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 Zscaler'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.
