Distribution Finance Capital Holdings plc's (LON:DFCH) Path To Profitability

We feel now is a pretty good time to analyse Distribution Finance Capital Holdings plc's (LON:DFCH) business as it appears the company may be on the cusp of a considerable accomplishment. Distribution Finance Capital Holdings plc operates as a specialized finance company in the United Kingdom. With the latest financial year loss of UK£14m and a trailing-twelve-month loss of UK£13m, the UK£46m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Distribution Finance Capital Holdings will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Distribution Finance Capital Holdings

Distribution Finance Capital Holdings is bordering on breakeven, according to some British Diversified Financial analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of UK£1.9m in 2022. The company is therefore projected to breakeven around 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 70% is expected, 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 Distribution Finance Capital Holdings' growth isn’t the focus of this broad overview, however, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. Distribution Finance Capital Holdings currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Distribution Finance Capital Holdings, so if you are interested in understanding the company at a deeper level, take a look at Distribution Finance Capital Holdings' company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:

1. Historical Track Record: What has Distribution Finance Capital Holdings' performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Distribution Finance Capital Holdings' 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.

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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