On 27 February, the Ocado Group (LSE:OCDO) share price tumbled 19% after the retailer/know-how group introduced its outcomes for the 52 weeks ended 1 December (FY24).

Buyers appeared sad that the group had recorded a bigger-than-expected lack of £374.3m. However regardless of this, the corporate stays one of many largest on the FTSE 250. Its shares at the moment (5 March) change fingers for round 230p, giving Ocado a market-cap of slightly below £2bn.

Nevertheless, there seems to be some uncertainty in regards to the future path of the corporate. May its shares attain £10? Or is a drop to £1 extra probably?

Let’s have a look.

If not fairly £10, there’s scope for progress

Though the group has three working divisions, the largest progress is prone to come from its Know-how Options enterprise. Presently, this supplies an IT platform to 13 retail companions throughout the globe.

The Ocado Good Platform (OSP), which is described as an “end-to-end ecommerce, fulfilment and logistics solution”, makes use of intelligent robots and synthetic intelligence (AI) to maximise operational efficiencies. As a part of the service, the corporate operates 20 Buyer Fulfilment Centres (CFCs) on behalf of its clients.

Throughout FY24, income for the enterprise unit was 18.1% greater than for FY23, at £496.5m. And its know-how and help prices had been 5% decrease. General, the division’s contribution to overheads was 17.4% extra. Additionally, the group has a pipeline of one other 7 CFCs, which needs to be operational by FY27.

Clearly, issues are transferring in the fitting path though a four-fold enhance within the share price appears optimistic to me.

Why I feel £1’s extra probably

When reporting its numbers, Ocado likes to deal with adjusted EBITDA (earnings earlier than curiosity, tax, depreciation and amortisation). Certainly, this was £153.3m in FY24, in comparison with £51.6m for FY23.

However the firm has a number of ‘D’ and ‘A’ (£460.3m in FY24) which implies it often ends up reporting a post-tax loss.

The administrators are forecasting a drop in depreciation costs as capital expenditure is to be scaled again. And whereas this can be a non-cash value, the know-how to which it relates must get replaced in some unspecified time in the future, so it shouldn’t be ignored.

The group’s know-how and CFCs are costly. Web debt elevated by 11.6% through the 12 months. At 1 December 2024, it was £1.2bn.

It’s ironic that earnings for the ‘old-fashioned’ a part of the group are doing the perfect. Ocado Retail, its three way partnership with Marks & Spencer, is “the fastest-growing grocer in the market” and has 1.1m lively consumers.

Though the group has some progressive options, no person actually is aware of when it’s going to be worthwhile. The plan is to be money movement optimistic within the second half of FY26. Nevertheless it’s unclear when earnings will transfer into the black.

And this offers me an issue. Particularly, how to worth a loss-making firm? Potential is all properly and good, however what’s it price?

If I had to decide on, I’d predict {that a} £1 share price is extra probably than a £10 one. In fact, no person is aware of for certain however I believe the take-up of OSPs is simply too gradual to show across the funds of the group earlier than it requires extra funding.

Because of this, I don’t need to purchase any of its shares.