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Bubs Australia Limited's (ASX:BUB) Shift From Loss To Profit

Simply Wall St

Bubs Australia Limited's (ASX:BUB): Bubs Australia Limited produces and sells various infant nutrition products in Australia, China, and internationally. On 30 June 2019, the AU$546m market-cap posted a loss of -AU$35.5m for its most recent financial year. Many investors are wondering the rate at which BUB will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for BUB, its year of breakeven and its implied growth rate.

Check out our latest analysis for Bubs Australia

According to the 3 industry analysts covering BUB, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$5.8m in 2021. BUB is therefore projected to breakeven around a few months from now. In order to meet this breakeven date, I calculated the rate at which BUB must grow year-on-year. It turns out an average annual growth rate of 62% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, BUB may become profitable much later than analysts predict.

ASX:BUB Past and Future Earnings, January 27th 2020

I’m not going to go through company-specific developments for BUB 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’d like to point out is that BUB has managed its capital prudently, with debt making up 1.9% of equity. This means that BUB has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of BUB which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at BUB, take a look at BUB’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should further examine:

  1. Valuation: What is BUB 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 BUB 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 Bubs Australia’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.

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.

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