Loss-Making Expert System SpA (BIT:EXSY) Expected To Breakeven

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 €43.05m market-cap company announced a latest loss of -€8.34m on 31 December 2017 for its most recent financial year result. As path to profitability is the topic on EXSY’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for EXSY.

See our latest analysis for Expert System

EXSY is bordering on breakeven, according to Software analysts. They expect the company to post a final loss in 2019, before turning a profit of €1.40m in 2020. EXSY is therefore projected to breakeven around a few months from now. What rate will EXSY 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 78.70%, which signals high confidence from analysts. If this rate turns out to be too aggressive, EXSY may become profitable much later than analysts predict.

BIT:EXSY Past Future Earnings August 1st 18
BIT:EXSY Past Future Earnings August 1st 18

Underlying developments driving EXSY’s growth isn’t the focus of this broad overview, though, 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.

Before I wrap up, there’s one issue worth mentioning. EXSY currently has a debt-to-equity ratio of 104.06%. Typically, debt shouldn’t exceed 40% of your equity, and EXSY has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of EXSY to cover in one brief article, but the key fundamentals for the company can all be found in one place – EXSY’s company page on Simply Wall St. I’ve also compiled a list of essential aspects 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.