Loss-Making Enrad AB (NGM:ENRAD) Expected To Breakeven In The Medium-Term

With the business potentially at an important milestone, we thought we'd take a closer look at Enrad AB's (NGM:ENRAD) future prospects. Enrad AB provides eco-friendly refrigeration units and heat pumps in Sweden. The kr122m market-cap company posted a loss in its most recent financial year of kr5.2m and a latest trailing-twelve-month loss of kr5.6m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Enrad will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Enrad

Enrad is bordering on breakeven, according to some Swedish Machinery analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of kr1.0m in 2024. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 76% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Enrad given that this is a high-level summary, 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 we wrap up, there’s one aspect worth mentioning. Enrad currently has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Enrad 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 Enrad 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 Enrad’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.