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HEG Limited’s (NSEI:HEG): HEG Limited manufactures graphite electrodes primarily for steel manufacturers in India. On 31 March 2017, the IN₨103.16B market-cap posted a loss of -IN₨441.88M for its most recent financial year. Many investors are wondering the rate at which HEG will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for HEG’s growth and when analysts expect the company to become profitable.
Check out our latest analysis for HEG
Expectation from analysts is HEG is on the verge of breakeven. They expect the company to post a final loss in 2014, before turning a profit of IN₨790.45M in 2015. HEG is therefore projected to breakeven around a few months from now. What rate will HEG have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 47.39%, which is extremely buoyant. If this rate turns out to be too aggressive, HEG may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for HEG given that this is a high-level summary, however, bear in mind that generally 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 HEG is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in HEG’s case is 71.78%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on HEG, so if you are interested in understanding the company at a deeper level, take a look at HEG’s company page on Simply Wall St. I’ve also put together a list of important aspects you should further research:
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1. Valuation: What is HEG 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 HEG is currently mispriced by the market.
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2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on HEG’s board and the CEO’s back ground.
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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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.