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Directa Plus Plc's (LON:DCTA) Path To Profitability

Simply Wall St

Directa Plus Plc's (LON:DCTA): Directa Plus Plc manufactures and sells graphene-based products for industrial and commercial applications in Italy and internationally. On 31 December 2018, the UK£42m market-cap posted a loss of -€4.0m for its most recent financial year. The most pressing concern for investors is DCTA’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for DCTA.

See our latest analysis for Directa Plus

Consensus from the 2 Chemicals analysts is DCTA is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of €300k in 2021. So, DCTA is predicted to breakeven approximately 2 years from now. In order to meet this breakeven date, I calculated the rate at which DCTA must grow year-on-year. It turns out an average annual growth rate of 61% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, DCTA may become profitable much later than analysts predict.

AIM:DCTA Past and Future Earnings, August 22nd 2019

Underlying developments driving DCTA’s growth isn’t the focus of this broad overview, though, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before I wrap up, there’s one aspect worth mentioning. DCTA has managed its capital prudently, with debt making up 2.0% of equity. This means that DCTA 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 DCTA 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 DCTA, take a look at DCTA’s company page on Simply Wall St. I’ve also compiled a list of essential aspects you should further research:

  1. Valuation: What is DCTA 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 DCTA 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 Directa Plus’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.