When Will Surface Transforms Plc (LON:SCE) Turn A Profit?

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. On 31 December 2020, the UK£126m market-cap company posted a loss of UK£2.3m for its most recent financial year. As path to profitability is the topic on Surface Transforms' investors mind, we've decided to gauge market sentiment. 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

According to the 3 industry analysts covering Surface Transforms, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of UK£2.4m in 2022. The company is therefore projected to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 96% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Surface Transforms given that this is a high-level summary, 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’d like to point out is that The company has managed its capital judiciously, with debt making up 7.9% 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 put together a list of key factors 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.

If you’re looking to trade Surface Transforms, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.