Embraer S.A. (BVMF:EMBR3) Is Expected To Breakeven In The Near Future

By
Simply Wall St
Published
September 27, 2021
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. With the latest financial year loss of R$3.6b and a trailing-twelve-month loss of R$708m, the R$18b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Embraer'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 Embraer

According to the 11 industry analysts covering Embraer, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of R$270m in 2022. The company is therefore projected to breakeven just over a year 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 64% 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
BOVESPA:EMBR3 Earnings Per Share Growth September 27th 2021

We're not going to go through company-specific developments for Embraer given that this is a high-level summary, though, 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 we wrap up, there’s one issue worth mentioning. Embraer currently has a debt-to-equity ratio of 151%. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in 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 compiled a list of important factors you should further research:

  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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.