We feel now is a pretty good time to analyse Hostmore plc’s (LON:MORE) business as it appears the company may be on the cusp of a considerable accomplishment. Hostmore plc operates in the hospitality business. The UK£77m market-cap company announced a latest loss of UK£567k on 02 January 2022 for its most recent financial year result. Many investors are wondering about the rate at which Hostmore 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.
Hostmore is bordering on breakeven, according to the 3 British Hospitality analysts. They expect the company to post a final loss in 2021, before turning a profit of UK£12m in 2022. The company is therefore projected to breakeven around 12 months 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 47%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Hostmore’s growth isn’t the focus of this broad overview, however, keep in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 35% 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.
This article is not intended to be a comprehensive analysis on Hostmore, so if you are interested in understanding the company at a deeper level, take a look at Hostmore’s company page on Simply Wall St. We’ve also compiled a list of essential aspects you should further examine:
Valuation: What is Hostmore 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 Hostmore 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 Hostmore’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.
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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.