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With the business potentially at an important milestone, we thought we'd take a closer look at Shearwater Group plc's (LON:SWG) future prospects. Shearwater Group plc provides operational resilience solutions in the United Kingdom, Europe, North America, and internationally. The UK£32m market-cap company posted a loss in its most recent financial year of UK£1.5m and a latest trailing-twelve-month loss of UK£911k shrinking the gap between loss and breakeven. The most pressing concern for investors is Shearwater Group's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Consensus from 2 of the British Software analysts is that Shearwater Group is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of UK£3.0m in 2022. The company is therefore projected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 94% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Shearwater Group's growth isn’t the focus of this broad overview, though, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 1.4% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Shearwater Group, so if you are interested in understanding the company at a deeper level, take a look at Shearwater Group's company page on Simply Wall St. We've also put together a list of key aspects you should look at:
Valuation: What is Shearwater 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 Shearwater Group is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Shearwater Group’s board and the CEO’s background.
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.
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