With the business potentially at an important milestone, we thought we'd take a closer look at Atotech Limited's (NYSE:ATC) future prospects. Atotech Limited, a chemicals technology company, provides specialty electroplating and surface finishing solutions worldwide. The US$4.2b market-cap company announced a latest loss of US$423m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Atotech 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.
According to the 9 industry analysts covering Atotech, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$99m in 2021. The company is therefore projected to breakeven around a year 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 85% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Atotech's growth isn’t the focus of this broad overview, though, take into account that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with Atotech is its 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. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of Atotech to cover in one brief article, but the key fundamentals for the company can all be found in one place – Atotech's company page on Simply Wall St. We've also put together a list of important aspects you should further examine:
Valuation: What is Atotech 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 Atotech 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 Atotech’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. 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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