Windar Photonics PLC's (LON:WPHO) Path To Profitability

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Windar Photonics PLC's (LON:WPHO): Windar Photonics Plc, through its subsidiaries, develops and sells light detection and ranging sensors, and associated products for use on electricity generating wind turbines. The UK£20m market-cap posted a loss in its most recent financial year of -€2.2m and a latest trailing-twelve-month loss of -€1.7m shrinking the gap between loss and breakeven. The most pressing concern for investors is WPHO’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for WPHO, its year of breakeven and its implied growth rate.

View our latest analysis for Windar Photonics

Consensus from the 2 Electronic analysts is WPHO is on the verge of breakeven. They expect the company to post a final loss in 2018, before turning a profit of €153k in 2019. Therefore, WPHO is expected to breakeven roughly a couple of months from now! How fast will WPHO have to grow each year in order to reach the breakeven point by 2019? Working backwards from analyst estimates, it turns out that they expect the company to grow 125% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, WPHO may become profitable much later than analysts predict.

AIM:WPHO Past and Future Earnings, June 12th 2019

Underlying developments driving WPHO’s growth isn’t the focus of this broad overview, but, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I would like to bring into light with WPHO is its debt-to-equity ratio of 139%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and WPHO has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on WPHO, so if you are interested in understanding the company at a deeper level, take a look at WPHO’s company page on Simply Wall St. I’ve also put together a list of essential aspects you should further examine:

  1. Valuation: What is WPHO 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 WPHO 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 Windar Photonics’s board and the CEO’s back ground.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.