Market Sentiment Around Loss-Making Nanoco Group plc (LON:NANO)

Nanoco Group plc’s (LON:NANO): Nanoco Group plc, together with its subsidiaries, engages in the research, development, manufacture, and licensing of cadmium and heavy-metal-free quantum dots (CFQD), and semiconductor nanomaterials for use in various commercial applications. The UK£145m market-cap company announced a latest loss of -UK£6.0m on 31 July 2018 for its most recent financial year result. As path to profitability is the topic on NANO’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for NANO, its year of breakeven and its implied growth rate.

Check out our latest analysis for Nanoco Group

NANO is bordering on breakeven, according to the 4 Semiconductor analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of UK£7.2m in 2021. NANO is therefore projected to breakeven around 2 years from now. What rate will NANO have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 78%, which is extremely buoyant. If this rate turns out to be too aggressive, NANO may become profitable much later than analysts predict.

LSE:NANO Past and Future Earnings, March 8th 2019
LSE:NANO Past and Future Earnings, March 8th 2019

Given this is a high-level overview, I won’t go into details of NANO’s upcoming projects, but, keep 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 I’d like to point out is that NANO has managed its capital prudently, with debt making up 3.2% of equity. This means that NANO has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of NANO which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at NANO, take a look at NANO’s company page on Simply Wall St. I’ve also compiled a list of key factors you should further examine:

  1. Valuation: What is NANO 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 NANO 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 Nanoco Group’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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.