Provident Financial plc (LON:PFG): Is Breakeven Near?

Provident Financial plc's (LSE:PFG): Provident Financial plc provides personal credit products to the non-standard lending market in the United Kingdom and the Republic of Ireland. The UK£1.37B market-cap company announced a latest loss of -UK£134.40M on 31 December 2017 for its most recent financial year result. Many investors are wondering the rate at which PFG will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for PFG.

Expectation from analysts is PFG is on the verge of breakeven. They expect the company to post a final loss in 2017, before turning a profit of UK£125.84M in 2018. Therefore, PFG is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which PFG must grow year-on-year. It turns out an average annual growth rate of 75.44% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, I won’t go into detail the detail of PFG’s upcoming projects, however, keep in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before I wrap up, there’s one issue worth mentioning. PFG currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and PFG has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on PFG, so if you are interested in understanding the company at a deeper level, take a look at PFG’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further research:

1. Valuation: What is PFG 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 PFG 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 Provident Financial’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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.