Loss-Making Eltel AB (publ) (STO:ELTEL) Set To Breakeven

We feel now is a pretty good time to analyse Eltel AB (publ)'s (STO:ELTEL) business as it appears the company may be on the cusp of a considerable accomplishment. Eltel AB (publ) provides technical services for the power and communication infrastructure networks in Sweden, Finland, Norway, Poland, Denmark, Germany, and the Baltic countries. The kr3.5b market-cap company’s loss lessened since it announced a €26m loss in the full financial year, compared to the latest trailing-twelve-month loss of €200k, as it approaches breakeven. As path to profitability is the topic on Eltel's investors mind, we've decided to gauge market sentiment. 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 Eltel

Eltel is bordering on breakeven, according to some Swedish Construction analysts. They expect the company to post a final loss in 2019, before turning a profit of €13m in 2020. The company is therefore projected to breakeven around a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 92% is expected, which is extremely buoyant. 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 Eltel's upcoming projects, but, take into account that by and large 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 issue worth mentioning. Eltel currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Eltel's case is 68%. 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 Eltel to cover in one brief article, but the key fundamentals for the company can all be found in one place – Eltel's company page on Simply Wall St. We've also put together a list of key aspects you should look at:

1. Valuation: What is Eltel 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 Eltel 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 Eltel’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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