Seafire AB (publ) (STO:SEAF) On The Verge Of Breaking Even

Seafire AB (publ) (STO:SEAF) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Seafire AB (publ) acquires and develops companies in the small-cap segment. The kr268m market-cap company announced a latest loss of kr478k on 31 December 2020 for its most recent financial year result. As path to profitability is the topic on Seafire'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.

View our latest analysis for Seafire

According to some industry analysts covering Seafire, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of kr16m in 2021. The company is therefore projected to breakeven around a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 52%, which is rather optimistic! 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 Seafire given that this is a high-level summary, though, take into account that typically 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. Seafire currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

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

1. Historical Track Record: What has Seafire'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 Seafire'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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