StoneMor Partners LP’s (NYSE:STON): StoneMor Partners L.P., together with its subsidiaries, owns and operates cemeteries and funeral homes in the United States. With the latest financial year loss of -US$32.50m and a trailing-twelve month of -US$35.34m, the US$228.13m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is STON’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for STON, its year of breakeven and its implied growth rate.
Expectation from Consumer Services analysts is STON is on the verge of breakeven. They expect the company to post a final loss in -1, before turning a profit of US$0 in . Therefore, STON is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which STON must grow year-on-year. It turns out an average annual growth rate of 36.34% is expected, which is rather optimistic! If this rate turns out to be too aggressive, STON may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of STON’s upcoming projects, but, keep in mind that generally 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 STON is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in STON’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on STON, so if you are interested in understanding the company at a deeper level, take a look at STON’s company page on Simply Wall St. I’ve also compiled a list of essential aspects you should further research:
- Historical Track Record: What has STON’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on StoneMor Partners’s board and the CEO’s back ground.
- 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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.