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With the business potentially at an important milestone, we thought we'd take a closer look at Custom Truck One Source, Inc.'s (NYSE:CTOS) future prospects. Custom Truck One Source, Inc. provides specialty equipment rental services to the electric utility transmission and distribution, telecom, and rail industries in North America. The US$1.7b market-cap company posted a loss in its most recent financial year of US$21m and a latest trailing-twelve-month loss of US$149m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Custom Truck One Source's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Consensus from 3 of the American Trade Distributors analysts is that Custom Truck One Source is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$71m in 2022. Therefore, the company is expected to breakeven just over a year 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 111% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Custom Truck One Source's upcoming projects, however, take into account that typically 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. Custom Truck One Source currently has a debt-to-equity ratio of 153%. Generally, the rule of thumb is 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.
There are key fundamentals of Custom Truck One Source 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 Custom Truck One Source, take a look at Custom Truck One Source's company page on Simply Wall St. We've also compiled a list of essential factors you should further research:
Valuation: What is Custom Truck One Source 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 Custom Truck One Source 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 Custom Truck One Source’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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