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When Will Renewi plc (LON:RWI) Become Profitable?

Simply Wall St

Renewi plc's (LON:RWI): Renewi plc provides waste-to-product services in the United Kingdom, the Netherlands, Belgium, France, Germany, Hungary, Portugal, Canada, and Luxembourg. The company’s loss has recently broadened since it announced a -€71.7m loss in the full financial year, compared to the latest trailing-twelve-month loss of -€109.7m, moving it further away from breakeven. As path to profitability is the topic on RWI’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for RWI.

View our latest analysis for Renewi

RWI is bordering on breakeven, according to the 2 Commercial Services analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of €31m in 2021. So, RWI is predicted to breakeven approximately a few months from now. How fast will RWI have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 97% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, RWI may become profitable much later than analysts predict.

LSE:RWI Past and Future Earnings April 10th 2020

Given this is a high-level overview, I won’t go into details of RWI’s upcoming projects, but, bear 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 I would like to bring into light with RWI is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in RWI’s case, it has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is RWI 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 RWI 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 Renewi’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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