Expert System SpA (BIT:EXSY): Is Breakeven Near?

Expert System SpA's (BIT:EXSY): Expert System S.p.A. develops and sells cognitive computing software products based on artificial intelligence algorithms to read and understand written language in Italy and internationally. The €43m market-cap company’s loss lessens since it announced a -€8.3m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -€4.5m, as it approaches breakeven. The most pressing concern for investors is EXSY’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for EXSY’s growth and when analysts expect the company to become profitable.

View our latest analysis for Expert System

Consensus from the 3 Software analysts is EXSY is on the verge of breakeven. They expect the company to post a final loss in 2019, before turning a profit of €1.8m in 2020. So, EXSY is predicted to breakeven approximately 2 years from now. How fast will EXSY have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 90% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

I’m not going to go through company-specific developments for EXSY given that this is a high-level summary, though, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I would like to bring into light with EXSY is its debt-to-equity ratio of 127%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and EXSY has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on EXSY, so if you are interested in understanding the company at a deeper level, take a look at EXSY’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further research:

1. Valuation: What is EXSY 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 EXSY 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 Expert System’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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.