Regis Corporation (NYSE:RGS): Are Analysts Optimistic?

Regis Corporation (NYSE:RGS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Regis Corporation owns, operates, and franchises hairstyling and hair care salons in the United States, the United Kingdom, Canada, and Puerto Rico. The US$111m market-cap company announced a latest loss of US$113m on 30 June 2021 for its most recent financial year result. As path to profitability is the topic on Regis' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Regis

Regis is bordering on breakeven, according to the 2 American Consumer Services analysts. They expect the company to post a final loss in 2022, before turning a profit of US$4.6m in 2023. Therefore, the company is expected to breakeven roughly 2 years 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 63% 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.

We're not going to go through company-specific developments for Regis given that this is a high-level summary, but, bear in mind that generally 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. Regis 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. 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 Regis to cover in one brief article, but the key fundamentals for the company can all be found in one place – Regis' company page on Simply Wall St. We've also put together a list of important aspects you should further examine:

1. Valuation: What is Regis 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 Regis 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 Regis’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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.