Atlantic Sapphire ASA's (OB:ASA) Has Found A Path To Profitability

We feel now is a pretty good time to analyse Atlantic Sapphire ASA's (OB:ASA) business as it appears the company may be on the cusp of a considerable accomplishment. Atlantic Sapphire ASA, together with its subsidiaries, engages in the land-based salmon farming business. The company’s loss has recently broadened since it announced a US$13m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$35m, moving it further away from breakeven. The most pressing concern for investors is Atlantic Sapphire's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Atlantic Sapphire

According to the 3 industry analysts covering Atlantic Sapphire, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$18m in 2021. The company is therefore projected to breakeven around a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 57% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Atlantic Sapphire's growth isn’t the focus of this broad overview, though, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Atlantic Sapphire is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Atlantic Sapphire's case is 40%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Atlantic Sapphire, so if you are interested in understanding the company at a deeper level, take a look at Atlantic Sapphire's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:

1. Historical Track Record: What has Atlantic Sapphire's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Atlantic Sapphire'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. 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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