Market Sentiment Around Loss-Making Similarweb Ltd. (NYSE:SMWB)

We feel now is a pretty good time to analyse Similarweb Ltd.'s (NYSE:SMWB) business as it appears the company may be on the cusp of a considerable accomplishment. Similarweb Ltd. provides cloud-based digital intelligence solutions in the United States, Europe, the Asia Pacific, the United Kingdom, Israel, and internationally. The US$612m market-cap company announced a latest loss of US$29m on 31 December 2023 for its most recent financial year result. The most pressing concern for investors is Similarweb'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 Similarweb

Similarweb is bordering on breakeven, according to the 6 American Software analysts. They expect the company to post a final loss in 2024, before turning a profit of US$1.2m in 2025. So, the company is predicted to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 104%, 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 Similarweb's upcoming projects, however, bear 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. Similarweb currently has a debt-to-equity ratio of 161%. Generally, the rule of thumb is 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 around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Similarweb 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 Similarweb 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 Similarweb’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.

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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.