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With the business potentially at an important milestone, we thought we'd take a closer look at Itafos Inc.'s (CVE:IFOS) future prospects. Itafos operates as a phosphate and specialty fertilizer platform company. The CA$239m market-cap company posted a loss in its most recent financial year of US$63m and a latest trailing-twelve-month loss of US$12m shrinking the gap between loss and breakeven. As path to profitability is the topic on Itafos' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
According to some industry analysts covering Itafos, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$46m in 2021. So, the company is predicted to breakeven approximately 12 months 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 96% 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.
Given this is a high-level overview, we won’t go into details of Itafos' upcoming projects, however, take into account that by and large 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. Itafos currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Itafos, so if you are interested in understanding the company at a deeper level, take a look at Itafos' company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:
Valuation: What is Itafos 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 Itafos 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 Itafos’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.
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.
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