Breakeven On The Horizon For STS Group AG (ETR:SF3)

We feel now is a pretty good time to analyse STS Group AG's (ETR:SF3) business as it appears the company may be on the cusp of a considerable accomplishment. STS Group AG supplies components and systems for the commercial vehicle and automotive industry in Germany, France, Mexico, the United States, and China. The €23m market-cap company posted a loss in its most recent financial year of €600k and a latest trailing-twelve-month loss of €600k shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which STS Group will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

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STS Group is bordering on breakeven, according to some German Machinery analysts. They expect the company to post a final loss in 2026, before turning a profit of €2.9m in 2027. Therefore, the company is expected to breakeven roughly 2 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 62%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving STS Group's growth isn’t the focus of this broad overview, however, keep in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

See our latest analysis for STS Group

Before we wrap up, there’s one issue worth mentioning. STS Group currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in STS Group's case is 47%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is STS Group 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 STS Group 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 STS Group’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.