Breakeven Is Near for Atotech Limited (NYSE:ATC)

Atotech Limited (NYSE:ATC) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Atotech Limited, a chemicals technology company, provides specialty electroplating and surface finishing solutions worldwide. The US$4.2b market-cap company announced a latest loss of US$423m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Atotech 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.

View our latest analysis for Atotech

Consensus from 9 of the American Chemicals analysts is that Atotech is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$99m in 2021. So, the company is predicted to breakeven approximately 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 85% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Atotech's upcoming projects, but, take into account that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Atotech 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. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Atotech, so if you are interested in understanding the company at a deeper level, take a look at Atotech'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 Atotech 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 Atotech 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 Atotech’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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