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Purplebricks Group plc's (LON:PURP) Shift From Loss To Profit

Simply Wall St

Purplebricks Group plc's (LON:PURP): Purplebricks Group plc engages in real estate agency business in the United Kingdom, Australia, the United States, and Canada. With the latest financial year loss of -UK£54.9m and a trailing-twelve month of -UK£61.2m, the UK£376m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is PURP’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for PURP, its year of breakeven and its implied growth rate.

View our latest analysis for Purplebricks Group

Consensus from the 4 Real Estate analysts is PURP is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of UK£1.5m in 2021. Therefore, PURP is expected to breakeven roughly a couple of months from now! What rate will PURP 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 92%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

AIM:PURP Past and Future Earnings, January 21st 2020

Given this is a high-level overview, I won’t go into details of PURP’s upcoming projects, however, keep 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 PURP has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which usually has a high level of debt relative to its equity. PURP currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are too many aspects of PURP to cover in one brief article, but the key fundamentals for the company can all be found in one place – PURP’s company page on Simply Wall St. I’ve also compiled a list of relevant factors you should further research:

  1. Valuation: What is PURP 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 PURP 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 Purplebricks Group’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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