We feel now is a pretty good time to analyse Geox S.p.A.'s (BIT:GEO) business as it appears the company may be on the cusp of a considerable accomplishment. Geox S.p.A. creates, produces, promotes, and distributes footwear and apparel to retailers and end consumers in Italy, rest of Europe, North America, and internationally. The €305m market-cap company announced a latest loss of €128m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is Geox's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Geox is bordering on breakeven, according to the 3 Italian Luxury analysts. They expect the company to post a final loss in 2022, before turning a profit of €11m in 2023. The company is therefore projected to breakeven around 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 108% year-on-year, on average, which is extremely buoyant. 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 Geox given that this is a high-level summary, though, take into account that typically 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. Geox currently has a debt-to-equity ratio of 106%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Geox, so if you are interested in understanding the company at a deeper level, take a look at Geox's company page on Simply Wall St. We've also compiled a list of important factors you should look at:
- Valuation: What is Geox 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 Geox is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Geox’s board and the CEO’s background.
- 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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