Re:NewCell AB (publ)'s (STO:RENEW) Shift From Loss To Profit

With the business potentially at an important milestone, we thought we'd take a closer look at Re:NewCell AB (publ)'s (STO:RENEW) future prospects. Re:NewCell AB (publ) operates as a textile recycling company in Sweden. With the latest financial year loss of kr300m and a trailing-twelve-month loss of kr371m, the kr3.1b market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Re:NewCell'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.

Check out our latest analysis for Re:NewCell

Consensus from 2 of the Swedish Chemicals analysts is that Re:NewCell is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of kr223m in 2024. Therefore, the company is expected to breakeven just over a year from today. 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 87% 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.

Underlying developments driving Re:NewCell's growth isn’t the focus of this broad overview, though, bear in mind 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. Re:NewCell currently has a debt-to-equity ratio of 117%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. 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 Re:NewCell to cover in one brief article, but the key fundamentals for the company can all be found in one place – Re:NewCell's company page on Simply Wall St. We've also compiled a list of relevant factors you should look at:

1. Valuation: What is Re:NewCell 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 Re:NewCell 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 Re:NewCell’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.