Loss-Making Trainline Plc (LON:TRN) Expected To Breakeven In The Medium-Term

We feel now is a pretty good time to analyse Trainline Plc's (LON:TRN) business as it appears the company may be on the cusp of a considerable accomplishment. Trainline Plc operates an independent rail and coach travel platform that sells rail and coach tickets worldwide. With the latest financial year loss of UK£91m and a trailing-twelve-month loss of UK£61m, the UK£1.3b market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on Trainline's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Trainline

Consensus from 9 of the British Hospitality analysts is that Trainline is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of UK£21m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. 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 75%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

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We're not going to go through company-specific developments for Trainline given that this is a high-level summary, 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 issue worth mentioning. Trainline currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Trainline's case is 75%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Trainline which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Trainline, take a look at Trainline's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:

1. Valuation: What is Trainline 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 Trainline 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 Trainline’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.

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