Saga plc (LON:SAGA) Could Be Less Than A Year Away From Profitability

Saga plc (LON:SAGA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Saga plc provides general insurance, package and cruise holidays, and personal finance products and services in the United Kingdom. On 31 January 2021, the UK£541m market-cap company posted a loss of UK£68m for its most recent financial year. The most pressing concern for investors is Saga's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Saga

Saga is bordering on breakeven, according to the 4 British Insurance analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of UK£32m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 77% 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 Saga given that this is a high-level summary, though, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. Saga currently has a debt-to-equity ratio of 119%. Typically, 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 too many aspects of Saga to cover in one brief article, but the key fundamentals for the company can all be found in one place – Saga'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 Saga'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 Saga'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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