Aditya Birla Fashion and Retail Limited's (NSE:ABFRL) Path To Profitability

Aditya Birla Fashion and Retail Limited (NSE:ABFRL) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Aditya Birla Fashion and Retail Limited designs, manufactures, distributes, and retails fashion apparel and accessories in India and internationally. With the latest financial year loss of ₹360m and a trailing-twelve-month loss of ₹2.7b, the ₹211b market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Aditya Birla Fashion and Retail will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Aditya Birla Fashion and Retail

According to the 21 industry analysts covering Aditya Birla Fashion and Retail, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of ₹2.5b in 2025. 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 99% 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.

We're not going to go through company-specific developments for Aditya Birla Fashion and Retail 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.

One thing we would like to bring into light with Aditya Birla Fashion and Retail is its debt-to-equity ratio of 196%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Aditya Birla Fashion and Retail 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 Aditya Birla Fashion and Retail, take a look at Aditya Birla Fashion and Retail's company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:

1. Valuation: What is Aditya Birla Fashion and Retail 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 Aditya Birla Fashion and Retail 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 Aditya Birla Fashion and Retail’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. 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. Simply Wall St has no position in any stocks mentioned.