With the business potentially at an important milestone, we thought we'd take a closer look at Nufarm Limited's (ASX:NUF) future prospects. 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$1.8b market-cap company announced a latest loss of AU$548m on 30 September 2020 for its most recent financial year result. Many investors are wondering about the rate at which Nufarm 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.
According to the 11 industry analysts covering Nufarm, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$44m in 2021. 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 42%, 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 Nufarm's growth isn’t the focus of this broad overview, though, take into account that generally 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 issue worth mentioning. Nufarm currently has a relatively high level of debt. Typically, 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 in investing in the loss-making company.
There are key fundamentals of Nufarm 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 Nufarm, take a look at Nufarm's company page on Simply Wall St. We've also put together a list of relevant factors you should look at:
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. 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.
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