Saga plc (LON:SAGA) Could Be Less Than A Year Away From Profitability

We feel now is a pretty good time to analyse Saga plc's (LON:SAGA) business as it appears the company may be on the cusp of a considerable accomplishment. Saga plc provides general insurance, package and cruise holidays, and personal finance products and services in the United Kingdom. The UK£551m market-cap company announced a latest loss of UK£68m on 31 January 2021 for its most recent financial year result. Many investors are wondering about the rate at which Saga will turn a profit, with the big question being “when will the company breakeven?” 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 Saga

Saga is bordering on breakeven, according to the 4 British Insurance analysts. They expect the company to post a final loss in 2021, before turning a profit of UK£32m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 77% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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Given this is a high-level overview, we won’t go into details of Saga's upcoming projects, though, take into account that typically 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. Saga currently has a debt-to-equity ratio of 119%. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Saga to cover in one brief article, but the key fundamentals for the company can all be found in one place – Saga's company page on Simply Wall St. We've also compiled a list of important aspects you should look at:

1. Valuation: What is Saga 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 Saga 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 Saga’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. 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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