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Nightcap Plc (LON:NGHT) About To Shift From Loss To Profit

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·2 min read
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We feel now is a pretty good time to analyse Nightcap Plc's (LON:NGHT) business as it appears the company may be on the cusp of a considerable accomplishment. Nightcap Plc operates bars in the United Kingdom. The company’s loss has recently broadened since it announced a UK£5.4m loss in the full financial year, compared to the latest trailing-twelve-month loss of UK£5.9m, moving it further away from breakeven. As path to profitability is the topic on Nightcap's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Nightcap

Expectations from some of the British Hospitality analysts is that Nightcap is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of UK£1.4m in 2022. So, the company is predicted to breakeven approximately a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 96% 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.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving Nightcap's growth isn’t the focus of this broad overview, 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.

One thing we would like to bring into light with Nightcap is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Nightcap's case is 43%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Nightcap, so if you are interested in understanding the company at a deeper level, take a look at Nightcap's company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:

  1. Valuation: What is Nightcap 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 Nightcap 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 Nightcap’s board and the CEO’s background.

  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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.