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Schrole Group Ltd's (ASX:SCL) Shift From Loss To Profit

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  • SCL.AX

With the business potentially at an important milestone, we thought we'd take a closer look at Schrole Group Ltd's (ASX:SCL) future prospects. Schrole Group Ltd engages in the provision of software solutions and training services primarily to the education sector in Australia and internationally. The AU$16m market-cap company’s loss lessened since it announced a AU$2.2m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$1.9m, as it approaches breakeven. The most pressing concern for investors is Schrole Group's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Schrole Group

Expectations from some of the Australian Software analysts is that Schrole Group is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$400k in 2022. Therefore, the company is expected to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 107%, 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

Underlying developments driving Schrole Group's growth isn’t the focus of this broad overview, though, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we’d like to point out is that Schrole Group has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Schrole Group to cover in one brief article, but the key fundamentals for the company can all be found in one place – Schrole Group's company page on Simply Wall St. We've also put together a list of key factors you should further examine:

  1. Valuation: What is Schrole Group 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 Schrole Group 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 Schrole Group’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. 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.

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