thyssenkrupp AG's (ETR:TKA): thyssenkrupp AG operates in the areas of components technology, elevator technology, industrial solutions, marine systems, steel, and materials services in Germany, the United States, China, and internationally. The €7.6b market-cap company announced a latest loss of -€304.0m on 30 September 2019 for its most recent financial year result. The most pressing concern for investors is TKA’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for TKA’s growth and when analysts expect the company to become profitable.
TKA is bordering on breakeven, according to the 12 Metals and Mining analysts. They expect the company to post a final loss in 2020, before turning a profit of €557m in 2021. TKA is therefore projected to breakeven around a couple of months from now! In order to meet this breakeven date, I calculated the rate at which TKA must grow year-on-year. It turns out an average annual growth rate of 85% is expected, which is rather optimistic! If this rate turns out to be too aggressive, TKA may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for TKA given that this is a high-level summary, however, take into account that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. TKA currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and TKA has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on TKA, so if you are interested in understanding the company at a deeper level, take a look at TKA’s company page on Simply Wall St. I’ve also compiled a list of essential aspects you should further examine:
- Valuation: What is TKA 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 TKA is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on thyssenkrupp’s board and the CEO’s back ground.
- 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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thyssenkrupp AG operates in the areas of materials services, industrial components, automotive technology, steel, and marine systems in Germany, the United States, China, and internationally.
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Excellent balance sheet and fair value.