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Analysts Expect Breakeven For Expert System S.p.A. (BIT:EXSY)

Simply Wall St

Expert System S.p.A.'s (BIT:EXSY): Expert System S.p.A. develops and sells cognitive computing software products based on artificial intelligence algorithms to read and understand written language in Italy and internationally. The €56m market-cap company announced a latest loss of -€3.8m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on EXSY’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for EXSY’s growth and when analysts expect the company to become profitable.

View our latest analysis for Expert System

Consensus from the 4 Software analysts is EXSY is on the verge of breakeven. They expect the company to post a final loss in 2019, before turning a profit of €1.8m in 2020. Therefore, EXSY is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which EXSY must grow year-on-year. It turns out an average annual growth rate of 96% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, EXSY may become profitable much later than analysts predict.

BIT:EXSY Past and Future Earnings, April 19th 2019

I’m not going to go through company-specific developments for EXSY given that this is a high-level summary, however, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I would like to bring into light with EXSY is its debt-to-equity ratio of 136%. Typically, debt shouldn’t exceed 40% of your equity, and EXSY 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 EXSY to cover in one brief article, but the key fundamentals for the company can all be found in one place – EXSY’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further research:

  1. Valuation: What is EXSY 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 EXSY 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 Expert System’s board and the CEO’s back ground.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.