When Can We Expect A Profit From Spotless Group Holdings Limited (ASX:SPO)?

Spotless Group Holdings Limited’s (ASX:SPO): Spotless Group Holdings Limited provides outsourced facility, laundry and linen, technical and engineering, and maintenance and asset management services; and refrigeration solutions to various industries in Australia and New Zealand. With the latest financial year loss of -AU$347.40M and a trailing-twelve month of -AU$28.90M, the AU$1.24B market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is SPO’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for SPO’s growth and when analysts expect the company to become profitable.

View our latest analysis for Spotless Group Holdings

According to the industry analysts covering SPO, breakeven is near. They anticipate the company to incur a final loss in 2017, before generating positive profits of AU$371.82K in 2018. So, SPO is predicted to breakeven approximately a couple of months from now! In order to meet this breakeven date, I calculated the rate at which SPO must grow year-on-year. It turns out an average annual growth rate of 101.55% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

ASX:SPO Past Future Earnings Mar 9th 18
ASX:SPO Past Future Earnings Mar 9th 18

I’m not going to go through company-specific developments for SPO given that this is a high-level summary, however, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one issue worth mentioning. SPO currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in SPO’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of SPO which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at SPO, take a look at SPO’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should further research:

  1. Valuation: What is SPO 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 SPO 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 Spotless Group Holdings’s board and the CEO’s back ground.
  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.