We Might See A Profit From Wendel (EPA:MF) Soon

Wendel (EPA:MF) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Wendel is a private equity firm specializing in equity financing in middle markets and later stages through leveraged buy-out transactions. The €4.4b market-cap company posted a loss in its most recent financial year of €204m and a latest trailing-twelve-month loss of €317m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Wendel's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Wendel

Wendel is bordering on breakeven, according to the 4 French Diversified Financial analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of €116m in 2021. Therefore, the company is expected to breakeven roughly 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 55%, 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 Wendel's upcoming projects, though, bear in mind that generally 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 Wendel is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company 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.

Next Steps:

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

1. Valuation: What is Wendel 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 Wendel 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 Wendel’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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