Covestro (XTRA:1COV) Forecasted to Return to Profitability with 98% Annual Earnings Growth Expected

Covestro (XTRA:1COV) remains in the red, with losses deepening at an annualized rate of 53% over the past five years. Despite that backdrop, the company’s outlook remains compelling for investors: revenue is expected to grow 3.5% per year, while earnings are forecast to bounce back at a rapid 98.16% per year. This positions Covestro on track for profitability within three years. Shares are currently trading at €59.84, below an estimated fair value of €68.78 and lower than peer and sector averages on a price-to-sales basis. This could potentially indicate overlooked upside as sentiment turns more positive on profit recovery and valuation.

See our full analysis for Covestro.

Next, we will see how Covestro’s results and outlook compare to the dominant narratives circulating in the market and across the Simply Wall St community. Some themes are likely to ring true, while others may face tougher scrutiny.

See what the community is saying about Covestro

Margins Expected to Swing From -2.7% to 3.5%

• Analysts see profit margins rebounding from -2.7% today to 3.5% within three years, a dramatic shift that sets Covestro apart from peers who are still struggling with flat or negative outlooks.
• Consensus narrative notes this turnaround is anchored in Covestro’s strategic push toward specialty materials and its pivot to sustainable, circular production. This transition is expected to boost pricing power and drive consistent margin improvement over time.
  • Partnerships and innovation are expected to soften the impact from input cost swings and industry cyclicality, supporting resilience even if demand remains volatile.
  • Circular economy investments, such as new sustainable feedstocks and process upgrades, are positioned to capture premium pricing in high-growth applications where green credentials are increasingly rewarded.

See why analysts think Covestro’s transformation could set it apart, with the full consensus view in one place. 📊 Read the full Covestro Consensus Narrative.

Net Debt/EBITDA at 3.8x Heightens Financial Pressure

• The company’s net debt to EBITDA ratio has climbed to 3.8x, which increases attention on Covestro’s ability to manage obligations while returning to profitability.
• Consensus narrative raises concerns that persistent overcapacity and weak end-market demand could structurally depress earnings and limit flexibility, especially if high leverage is not curbed over the next several years.
  • Bears highlight that rising debt levels, negative free cash flow trends, and downgraded earnings guidance all contribute to an elevated risk profile for long-term investors.
  • Critics also point to ongoing exposure to cyclical markets and commodity-like products, warning that future downturns or substitution by greener alternatives could further stretch the company’s balance sheet.

Price-To-Sales at 0.8x Points to Discounted Valuation

• Covestro trades at a price-to-sales multiple of just 0.8x, which is sharply below the European Chemicals industry average of 1x and the peer average of 1.5x. Its current share price of €59.84 is not only under the consensus analyst price target (€61.18) but also well below DCF fair value (€68.78).
• Consensus narrative suggests this undervaluation reflects both skepticism around near-term recovery and cautious optimism for longer-term catalysts, with the balance of risk and reward hinging on margin expansion and successful execution of transformation goals.
  • It is notable that despite above-market earnings growth expectations, the muted premium over the current share price (3.2%) implies that investors remain unconvinced a full turnaround is in play just yet.
  • If Covestro can deliver on its forecast profit rebound and margin improvement, the upside from current discounted levels could become more widely recognized among value-seeking investors.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Covestro on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Spot an angle others might miss? You can shape your own take on Covestro’s story in just a few minutes. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Covestro.

See What Else Is Out There

Covestro’s high debt load and persistent negative cash flow raise real concerns about financial resilience, especially if industry headwinds last longer than expected.

If you want to reduce your exposure to those risks, use our solid balance sheet and fundamentals stocks screener (1986 results) to discover companies with stronger balance sheets and greater financial flexibility.

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@simplywallst.com