Starbreeze AB (publ) (STO:STAR B) Could Be Less Than A Year Away From Profitability

Starbreeze AB (publ) (STO:STAR B) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Starbreeze AB (publ) develops, creates, publishes, and distributes PC and console games in Europe, North America, Asia, and internationally. With the latest financial year loss of kr60m and a trailing-twelve-month loss of kr25m, the kr1.4b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Starbreeze's path to profitability – when will it breakeven? 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 Starbreeze

Starbreeze is bordering on breakeven, according to the 2 Swedish Entertainment analysts. They expect the company to post a final loss in 2022, before turning a profit of kr447m in 2023. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 12% year-on-year, on average, which is relatively reasonable. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Starbreeze's growth isn’t the focus of this broad overview, though, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Starbreeze is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Starbreeze's case is 77%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Starbreeze, so if you are interested in understanding the company at a deeper level, take a look at Starbreeze's company page on Simply Wall St. We've also compiled a list of important aspects you should look at:

1. Valuation: What is Starbreeze 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 Starbreeze 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 Starbreeze’s board and the CEO’s background.
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.

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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.