City of London Group plc's (LON:CIN) Profit Outlook

City of London Group plc (LON:CIN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. City of London Group plc primarily focuses on the provision of finance to the SME sector in the United Kingdom. The UK£61m market-cap company’s loss lessened since it announced a UK£9.7m loss in the full financial year, compared to the latest trailing-twelve-month loss of UK£9.0m, as it approaches breakeven. The most pressing concern for investors is City of London Group's path to profitability – when will it 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 City of London Group

City of London Group is bordering on breakeven, according to some British Diversified Financial analysts. 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 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 66% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving City of London Group's growth isn’t the focus of this broad overview, but, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with City of London Group is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around 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 essential 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.

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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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