Breakeven Is Near for Surface Transforms Plc (LON:SCE)

By
Simply Wall St
Published
May 13, 2022
AIM:SCE
Source: Shutterstock

We feel now is a pretty good time to analyse Surface Transforms Plc's (LON:SCE) business as it appears the company may be on the cusp of a considerable accomplishment. 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. The UK£92m market-cap company announced a latest loss of UK£4.0m on 31 December 2021 for its most recent financial year result. 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?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Surface Transforms

Consensus from 3 of the British Auto Components analysts is that Surface Transforms is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of UK£663k in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 69% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
AIM:SCE Earnings Per Share Growth May 13th 2022

Given this is a high-level overview, we won’t go into details of Surface Transforms' upcoming projects, though, take into account that typically 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 judiciously, with debt making up 7.5% 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:

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

  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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.