De.mem Limited (ASX:DEM) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. De.mem Limited designs, builds, owns, and operates de-centralized water and waste water treatment systems for its customers in industrial, municipal, and residential sectors. With the latest financial year loss of AU$3.5m and a trailing-twelve-month loss of AU$3.6m, the AU$58m market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on De.mem's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
De.mem is bordering on breakeven, according to some Australian Water Utilities analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$800k in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 63% is expected, 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.
Underlying developments driving De.mem's growth isn’t the focus of this broad overview, however, bear 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 3.8% 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.
There are too many aspects of De.mem to cover in one brief article, but the key fundamentals for the company can all be found in one place – De.mem's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should look at:
- Historical Track Record: What has De.mem's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on De.mem's board and the CEO’s background.
- 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.
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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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