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Melrose Industries PLC (LON:MRO): Is Breakeven Near?

With the business potentially at an important milestone, we thought we'd take a closer look at Melrose Industries PLC's (LON:MRO) future prospects. Melrose Industries PLC, together with its subsidiaries, engages in the aerospace, automotive, powder metallurgy, and other industrial businesses in the United Kingdom, rest of Europe, North America, and internationally. With the latest financial year loss of UK£228m and a trailing-twelve-month loss of UK£21m, the UK£6.5b market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on Melrose Industries' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Melrose Industries

Consensus from 11 of the British Aerospace & Defense analysts is that Melrose Industries is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of UK£25m in 2024. The company is therefore projected to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 82% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Melrose Industries given that this is a high-level summary, however, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

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One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 18% 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.

Next Steps:

This article is not intended to be a comprehensive analysis on Melrose Industries, so if you are interested in understanding the company at a deeper level, take a look at Melrose Industries' company page on Simply Wall St. We've also compiled a list of important aspects you should further research:

  1. Valuation: What is Melrose Industries 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 Melrose Industries 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 Melrose Industries’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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.