REC Silicon ASA (OB:REC): Is Breakeven Near?

REC Silicon ASA's (OB:REC): REC Silicon ASA, together with its subsidiaries, produces and sells silicon materials for the solar and electronics industries worldwide. With the latest financial year loss of -øre367.00m and a trailing-twelve month of -øre289.30m, the øre2.55b market-cap alleviates its loss by moving closer towards its target of breakeven. Many investors are wondering the rate at which REC 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 REC, its year of breakeven and its implied growth rate.

According to the industry analysts covering REC, breakeven is near. They expect the company to post a final loss in 2017, before turning a profit of øre27.95m in 2018. REC is therefore projected to breakeven around a couple of months from now! What rate will REC 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 21.31%, which is extremely buoyant. If this rate turns out to be too aggressive, REC may become profitable much later than analysts predict.

I’m not going to go through company-specific developments for REC given that this is a high-level summary, however, keep in mind that generally 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 aspect worth mentioning. REC has managed its capital prudently, with debt making up 37.97% of equity. This means that REC has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on REC, so if you are interested in understanding the company at a deeper level, take a look at REC’s company page on Simply Wall St. I’ve also put together a list of key aspects you should look at:

1. Historical Track Record: What has REC'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 REC Silicon’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.

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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.