S4 Capital plc (LON:SFOR) Has Found A Path To Profitability

Simply Wall St
·3 min read

S4 Capital plc (LON:SFOR) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. S4 Capital plc, together with its subsidiaries, operates as a digital advertising and marketing services company in the Americas, Europe and the Middle East, and the Asia Pacific. The UK£4.0b market-cap company announced a latest loss of UK£3.9m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is S4 Capital's path to profitability – when will it breakeven? 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 S4 Capital

According to the 2 industry analysts covering S4 Capital, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of UK£26m in 2021. Therefore, the company is expected to breakeven roughly a year 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 66%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving S4 Capital's growth isn’t the focus of this broad overview, though, take into account that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 13% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of S4 Capital which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at S4 Capital, take a look at S4 Capital's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:

  1. Valuation: What is S4 Capital 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 S4 Capital 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 S4 Capital’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. 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.