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

With the business potentially at an important milestone, we thought we'd take a closer look at REC Silicon ASA's (OB:RECSI) future prospects. REC Silicon ASA, together with its subsidiaries, produces and sells silicon materials for the solar and electronics industries worldwide. The kr6.1b market-cap company posted a loss in its most recent financial year of US$87m and a latest trailing-twelve-month loss of US$104m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is REC Silicon's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for REC Silicon

According to some industry analysts covering REC Silicon, breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of US$34m in 2024. The company is therefore projected to breakeven just over a year from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 107% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of REC Silicon's upcoming projects, but, 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 we wrap up, there’s one issue worth mentioning. REC Silicon currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of REC Silicon to cover in one brief article, but the key fundamentals for the company can all be found in one place – REC Silicon's company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:

1. Valuation: What is REC Silicon 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 REC Silicon 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 REC Silicon’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. 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. Simply Wall St has no position in any stocks mentioned.