Vapiano SE's (ETR:VAO): Vapiano SE operates a chain of restaurants in the fast casual dining segment in Germany, rest of the Europe, and internationally. With the latest financial year loss of -€93.4m and a trailing-twelve month of -€108.9m, the €101m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is VAO’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for VAO, its year of breakeven and its implied growth rate.
According to the 3 industry analysts covering VAO, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of €8.9m in 2022. So, VAO is predicted to breakeven approximately 3 years from now. How fast will VAO 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 64% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for VAO given that this is a high-level summary, though, bear 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 I would like to bring into light with VAO is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and VAO has considerably exceeded this. 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 VAO, so if you are interested in understanding the company at a deeper level, take a look at VAO’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further examine:
- Valuation: What is VAO 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 VAO 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 Vapiano’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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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