Saga plc (LON:SAGA) On The Verge Of Breaking Even

By
Simply Wall St
Published
January 25, 2022
LSE:SAGA
Source: Shutterstock

With the business potentially at an important milestone, we thought we'd take a closer look at Saga plc's (LON:SAGA) future prospects. Saga plc provides general insurance, package and cruise holidays, and personal finance products and services in the United Kingdom. The UK£372m market-cap company posted a loss in its most recent financial year of UK£68m and a latest trailing-twelve-month loss of UK£14m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Saga will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See 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£8.1m 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 62% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
LSE:SAGA Earnings Per Share Growth January 25th 2022

Given this is a high-level overview, we won’t go into details of Saga's upcoming projects, 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. Saga currently has a debt-to-equity ratio of 130%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. 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 important factors you should look at:

  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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