When Will Expert System S.p.A. (BIT:EXSY) Turn A Profit?

Expert System S.p.A.’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 €56m market-cap posted a loss in its most recent financial year of -€8.3m and a latest trailing-twelve-month loss of -€4.5m shrinking the gap between loss and breakeven. Many investors are wondering the rate at which EXSY will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for EXSY, its year of breakeven and its implied growth rate.

Check out our latest analysis for Expert System

Consensus from the 4 Software analysts is EXSY is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of €1.4m in 2020. So, EXSY is predicted to breakeven approximately a few months 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 83% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

BIT:EXSY Past and Future Earnings, March 7th 2019
BIT:EXSY Past and Future Earnings, March 7th 2019

I’m not going to go through company-specific developments for EXSY 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.

Before I wrap up, there’s one issue worth mentioning. EXSY currently has a debt-to-equity ratio of 127%. Typically, debt shouldn’t exceed 40% of your equity, which in EXSY’s case, it has significantly overshot. Note that a higher debt obligation increases the risk around 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 put together a list of essential aspects you should further examine:

  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.

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.