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HKScan Oyj's (HEL:HKSAV) Path To Profitability

Simply Wall St

HKScan Oyj's (HEL:HKSAV): HKScan Oyj produces, markets, and sells pork, beef, poultry and lamb products, processed meats, and convenience foods to the retail, food service, industrial, and export sectors in Finland, Sweden, Denmark, and the Baltics. On 31 December 2019, the €198m market-cap posted a loss of -€41.9m for its most recent financial year. As path to profitability is the topic on HKSAV’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for HKSAV.

View our latest analysis for HKScan Oyj

HKSAV is bordering on breakeven, according to Food analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of €10m in 2021. Therefore, HKSAV is expected to breakeven roughly a few months from now. What rate will HKSAV have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 106%, which is extremely buoyant. If this rate turns out to be too aggressive, HKSAV may become profitable much later than analysts predict.

HLSE:HKSAV Past and Future Earnings May 10th 2020

I’m not going to go through company-specific developments for HKSAV given that this is a high-level summary, however, keep in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one issue worth mentioning. HKSAV currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in HKSAV’s case is 82%. 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 HKSAV to cover in one brief article, but the key fundamentals for the company can all be found in one place – HKSAV’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should look at:

  1. Valuation: What is HKSAV 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 HKSAV 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 HKScan Oyj’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.

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. Thank you for reading.