When Can We Expect A Profit From Redwire Corporation (NYSE:RDW)?

By
Simply Wall St
Published
January 24, 2022
NYSE:RDW
Source: Shutterstock

With the business potentially at an important milestone, we thought we'd take a closer look at Redwire Corporation's (NYSE:RDW) future prospects. Redwire Corporation, a space infrastructure company, develops, manufactures, and sells mission critical space solutions and components for national security, civil, and commercial markets in the United States and internationally. The company’s loss has recently broadened since it announced a US$16m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$34m, moving it further away from breakeven. As path to profitability is the topic on Redwire'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 Redwire

According to some industry analysts covering Redwire, breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of US$23m in 2023. So, the company is predicted to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 72%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
NYSE:RDW Earnings Per Share Growth January 24th 2022

We're not going to go through company-specific developments for Redwire given that this is a high-level summary, however, bear in mind that generally 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 Redwire is its 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. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is Redwire 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 Redwire 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 Redwire’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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