Embraer S.A. (BVMF:EMBR3) Is About To Turn The Corner

By
Simply Wall St
Published
January 08, 2022
BOVESPA:EMBR3
Source: Shutterstock

We feel now is a pretty good time to analyse Embraer S.A.'s (BVMF:EMBR3) business as it appears the company may be on the cusp of a considerable accomplishment. Embraer S.A. designs, develops, manufactures, and sells aircrafts and systems in Brazil, North America, Latin America, the Asia Pacific, Brazil, Europe, and internationally. The R$18b market-cap company’s loss lessened since it announced a R$3.6b loss in the full financial year, compared to the latest trailing-twelve-month loss of R$293m, as it approaches breakeven. Many investors are wondering about the rate at which Embraer will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Embraer

According to the 12 industry analysts covering Embraer, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of R$326m in 2022. The company is therefore projected to breakeven around a year 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 69% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
BOVESPA:EMBR3 Earnings Per Share Growth January 8th 2022

Given this is a high-level overview, we won’t go into details of Embraer's upcoming projects, however, take into account that generally 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. Embraer currently has a debt-to-equity ratio of 153%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Embraer, so if you are interested in understanding the company at a deeper level, take a look at Embraer's company page on Simply Wall St. We've also put together a list of key aspects you should look at:

  1. Valuation: What is Embraer 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 Embraer 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 Embraer’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.

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