HKScan Oyj's (HEL:HKSAV) Has Found A Path To Profitability

We feel now is a pretty good time to analyse HKScan Oyj's (HEL:HKSAV) business as it appears the company may be on the cusp of a considerable accomplishment. HKScan Oyj produces, markets, and sells pork, beef, poultry and lamb products, processed meats, and convenience foods to the retail, food service, industrial, and export sectors in Finland, Sweden, Denmark, and the Baltics. With the latest financial year loss of €42m and a trailing-twelve-month loss of €22m, the €200m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which HKScan Oyj 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.

See our latest analysis for HKScan Oyj

Expectations from some of the Finnish Food analysts is that HKScan Oyj is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of €12m in 2021. 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 115%, 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 HKScan Oyj's growth isn’t the focus of this broad overview, but, bear in mind that typically 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 HKScan Oyj is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in HKScan Oyj's case is 94%. 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 key fundamentals of HKScan Oyj which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at HKScan Oyj, take a look at HKScan Oyj's company page on Simply Wall St. We've also put together a list of important factors you should further examine:

1. Valuation: What is HKScan Oyj 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 HKScan Oyj 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 HKScan Oyj’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. 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.
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