Shearwater Group plc's (LON:SWG) Profit Outlook

With the business potentially at an important milestone, we thought we'd take a closer look at Shearwater Group plc's (LON:SWG) future prospects. Shearwater Group plc provides operational resilience solutions in the United Kingdom, Europe, North America, and internationally. The UK£40m market-cap company announced a latest loss of UK£1.5m on 31 March 2020 for its most recent financial year result. The most pressing concern for investors is Shearwater Group's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Shearwater Group

According to the 2 industry analysts covering Shearwater Group, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of UK£3.0m in 2022. Therefore, the company is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 82% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth

We're not going to go through company-specific developments for Shearwater Group given that this is a high-level summary, however, keep in mind 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 aspect worth mentioning. The company has managed its capital prudently, with debt making up 9.1% 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 Shearwater Group, so if you are interested in understanding the company at a deeper level, take a look at Shearwater Group's company page on Simply Wall St. We've also put together a list of important factors you should further examine:

1. Valuation: What is Shearwater Group 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 Shearwater Group 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 Shearwater Group’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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