Loss-Making SIG plc (LON:SHI) Expected To Breakeven

SIG plc’s (LSE:SHI): SIG plc engages in the distribution of specialist building products for the construction and related markets in the United Kingdom, Ireland, and Mainland Europe. With the latest financial year loss of -UK£119.10M and a trailing-twelve month of -UK£163.50M, the UK£854.79M market-cap amplifies its loss by moving further away from its breakeven target. As path to profitability is the topic on SHI’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for SHI’s growth and when analysts expect the company to become profitable.

See our latest analysis for SIG

According to the industry analysts covering SHI, breakeven is near. They anticipate the company to incur a final loss in 2017, before generating positive profits of UK£58.90M in 2018. So, SHI is predicted to breakeven approximately a couple of months from now! What rate will SHI have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 53.73%, which is rather optimistic! If this rate turns out to be too aggressive, SHI may become profitable much later than analysts predict.

LSE:SHI Past Future Earnings Mar 7th 18
LSE:SHI Past Future Earnings Mar 7th 18

I’m not going to go through company-specific developments for SHI given that this is a high-level summary, but, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I would like to bring into light with SHI is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in SHI’s case is 66.26%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of SHI to cover in one brief article, but the key fundamentals for the company can all be found in one place – SHI’s company page on Simply Wall St. I’ve also put together a list of relevant aspects you should look at:

  1. Valuation: What is SHI 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 SHI 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 SIG’s board and the CEO’s back ground.
  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.