Yahoo Finance Nufarm Limited (ASX:NUF) Could Be Less Than A Year Away From Profitability
We feel now is a pretty good time to analyse Nufarm Limited's (ASX:NUF) business as it appears the company may be on the cusp of a considerable accomplishment. Nufarm Limited, together with its subsidiaries, develops, manufactures, and sells crop protection solutions and seed technologies in Australia, New Zealand, Asia, Europe, and North America. The AU$2.0b market-cap company announced a latest loss of AU$548m on 30 September 2020 for its most recent financial year result. As path to profitability is the topic on Nufarm's 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.
View our latest analysis for Nufarm
Consensus from 12 of the Australian Chemicals analysts is that Nufarm is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of AU$14m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 45% year-on-year, on average, which is extremely buoyant. 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 Nufarm given that this is a high-level summary, though, keep in mind 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 Nufarm is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Nufarm's case is 43%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
Next Steps:
There are too many aspects of Nufarm to cover in one brief article, but the key fundamentals for the company can all be found in one place – Nufarm's company page on Simply Wall St. We've also put together a list of relevant aspects you should further research:
Valuation: What is Nufarm 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 Nufarm is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Nufarm’s board and the CEO’s background.
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.
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