Analysts Are Optimistic We'll See A Profit From Surface Transforms Plc (LON:SCE)

Surface Transforms Plc (LON:SCE) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Surface Transforms Plc, together with its subsidiaries, designs, develops, manufactures, and sells carbon ceramic products for the brakes market in the United Kingdom and rest of Europe; the United States; and internationally. With the latest financial year loss of UK£2.3m and a trailing-twelve-month loss of UK£2.6m, the UK£78m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Surface Transforms 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 Surface Transforms

Surface Transforms is bordering on breakeven, according to the 3 British Auto Components analysts. They expect the company to post a final loss in 2020, before turning a profit of UK£166k in 2021. Therefore, the company is expected to breakeven roughly a year 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 120%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Surface Transforms' growth isn’t the focus of this broad overview, though, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 8.2% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Surface Transforms 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 Surface Transforms, take a look at Surface Transforms' company page on Simply Wall St. We've also compiled a list of essential factors you should further research:

1. Valuation: What is Surface Transforms 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 Surface Transforms 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 Surface Transforms’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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