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Sosandar plc's (LON:SOS) Path To Profitability

Simply Wall St

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Sosandar plc's (LON:SOS): Sosandar plc operates as an online retailer for womenswear in the United Kingdom. On 31 March 2019, the UK£19m market-cap posted a loss of -UK£3.5m for its most recent financial year. Many investors are wondering the rate at which SOS will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for SOS.

View our latest analysis for Sosandar

SOS is bordering on breakeven, according to Online Retail analysts. They expect the company to post a final loss in 2020, before turning a profit of UK£1.5m in 2021. SOS is therefore projected to breakeven around 2 years from now. In order to meet this breakeven date, I calculated the rate at which SOS must grow year-on-year. It turns out an average annual growth rate of 90% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

AIM:SOS Past and Future Earnings, July 18th 2019

Given this is a high-level overview, I won’t go into details of SOS’s upcoming projects, though, bear 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 I’d like to point out is that SOS has no debt on its balance sheet, which is rare for a loss-making loss-making, growth company, which usually has a high level of debt relative to its equity. This means that SOS 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:

This article is not intended to be a comprehensive analysis on SOS, so if you are interested in understanding the company at a deeper level, take a look at SOS’s company page on Simply Wall St. I’ve also put together a list of key aspects you should further research:

  1. Valuation: What is SOS 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 SOS 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 Sosandar’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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.