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When Will Rolls-Royce Holdings plc (LON:RR.) Become Profitable?

·2 min read

Rolls-Royce Holdings plc (LON:RR.) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Rolls-Royce Holdings plc operates as an industrial technology company in the United Kingdom and internationally. On 31 December 2020, the UK£8.9b market-cap company posted a loss of UK£3.2b for its most recent financial year. As path to profitability is the topic on Rolls-Royce Holdings' 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 Rolls-Royce Holdings

According to the 16 industry analysts covering Rolls-Royce Holdings, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of UK£402m in 2022. The company is therefore projected to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 89% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

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

We're not going to go through company-specific developments for Rolls-Royce Holdings given that this is a high-level summary, however, keep in mind that typically 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 Rolls-Royce Holdings is it currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

There are too many aspects of Rolls-Royce Holdings to cover in one brief article, but the key fundamentals for the company can all be found in one place – Rolls-Royce Holdings' company page on Simply Wall St. We've also put together a list of important aspects you should look at:

  1. Valuation: What is Rolls-Royce Holdings 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 Rolls-Royce Holdings 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 Rolls-Royce Holdings’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.

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. 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.

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