City of London Group plc (LON:CIN): Is Breakeven Near?

With the business potentially at an important milestone, we thought we'd take a closer look at City of London Group plc's (LON:CIN) future prospects. City of London Group plc primarily focuses on the provision of finance to the SME sector in the United Kingdom. With the latest financial year loss of UK£9.7m and a trailing-twelve-month loss of UK£9.0m, the UK£66m market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on City of London Group'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 City of London Group

Consensus from 2 of the British Diversified Financial analysts is that City of London Group is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of UK£6.3m in 2023. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 66% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for City of London Group given that this is a high-level summary, however, bear in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. City of London Group currently has a 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:

There are key fundamentals of City of London Group 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 City of London Group, take a look at City of London Group's company page on Simply Wall St. We've also put together a list of key factors you should further research:

1. Historical Track Record: What has City of London Group's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on City of London Group'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 decide to trade City of London Group, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all 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.