Efecte Oy (HEL:EFECTE) Is About To Turn The Corner

We feel now is a pretty good time to analyse Efecte Oy's (HEL:EFECTE) business as it appears the company may be on the cusp of a considerable accomplishment. Efecte Oy, a software company, provides cloud-based software as a service and identity management solutions in Finland, Sweden, Denmark, and Germany. The €65m market-cap company’s loss lessened since it announced a €1.4m loss in the full financial year, compared to the latest trailing-twelve-month loss of €1.0m, as it approaches breakeven. Many investors are wondering about the rate at which Efecte Oy 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.

Check out our latest analysis for Efecte Oy

According to some industry analysts covering Efecte Oy, breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of €100k in 2021. The company is therefore projected to breakeven around a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 80% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Efecte Oy's upcoming projects, though, keep in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. Efecte Oy currently has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Efecte Oy, so if you are interested in understanding the company at a deeper level, take a look at Efecte Oy's company page on Simply Wall St. We've also compiled a list of important aspects you should further examine:

1. Valuation: What is Efecte Oy 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 Efecte Oy 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 Efecte Oy’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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