We feel now is a pretty good time to analyse Youdao, Inc.'s (NYSE:DAO) business as it appears the company may be on the cusp of a considerable accomplishment. Youdao, Inc., an internet technology company, provides online services in the field of content, community, communication, and commerce in China. The US$547m market-cap company's loss lessened since it announced a CN¥721m loss in the full financial year, compared to the latest trailing-twelve-month loss of CN¥675m, as it approaches breakeven. The most pressing concern for investors is Youdao's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Youdao

According to the 8 industry analysts covering Youdao, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of CN¥592m in 2025. The company is therefore projected to breakeven around 2 years from now. 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 88% is expected, which is rather optimistic! 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 Youdao's upcoming projects, however, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there's one issue worth mentioning. Youdao currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

This article is not intended to be a comprehensive analysis on Youdao, so if you are interested in understanding the company at a deeper level, take a look at Youdao's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:

1. Valuation: What is Youdao 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 Youdao 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 Youdao'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.