Adient plc's (NYSE:ADNT) About To Shift From Loss To Profit

By
Simply Wall St
Published
July 06, 2021
NYSE:ADNT
Source: Shutterstock

We feel now is a pretty good time to analyse Adient plc's (NYSE:ADNT) business as it appears the company may be on the cusp of a considerable accomplishment. Adient plc designs, manufactures, and markets a range of seating systems and components for passenger cars, commercial vehicles, and light trucks. The US$4.2b market-cap company posted a loss in its most recent financial year of US$547m and a latest trailing-twelve-month loss of US$142m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Adient will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Adient

According to the 9 industry analysts covering Adient, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$252m in 2021. The company is therefore projected to breakeven around 12 months 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 29%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NYSE:ADNT Earnings Per Share Growth July 6th 2021

Given this is a high-level overview, we won’t go into details of Adient'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.

One thing we would like to bring into light with Adient is its debt-to-equity ratio of 194%. 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 around investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is Adient 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 Adient 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 Adient’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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.