Zamp S.A. (BVMF:ZAMP3) About To Shift From Loss To Profit

We feel now is a pretty good time to analyse Zamp S.A.'s (BVMF:ZAMP3) business as it appears the company may be on the cusp of a considerable accomplishment. Zamp S.A. engages in the developing, operating, and franchising restaurants under the Burger King and Popeyes brand names in Brazil. With the latest financial year loss of R$98m and a trailing-twelve-month loss of R$133m, the R$813m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Zamp will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Zamp

Consensus from 5 of the Brazilian Hospitality analysts is that Zamp is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of R$29m in 2024. So, the company is predicted to breakeven approximately 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 96%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Zamp given that this is a high-level summary, however, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Zamp is its debt-to-equity ratio of 137%. Generally, the rule of thumb is 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:

There are too many aspects of Zamp to cover in one brief article, but the key fundamentals for the company can all be found in one place – Zamp's company page on Simply Wall St. We've also put together a list of key factors you should look at:

1. Valuation: What is Zamp 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 Zamp 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 Zamp’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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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.