The Paradox of Profit: How SBF (FRA:CY1K) Soared Despite Rising Losses

Investors in SBF AG (FRA:CY1K) have witnessed a striking contradiction over the past year: the stock has surged by 68.85% despite the company reporting rising underlying losses and negative net income. This article dissects the forces driving this divergence, weighing the risks and opportunities for shareholders.

The Stock’s Volatile Climb

SBF’s share price has been a rollercoaster, hitting a 52-week low of €2.16 in early 2024 before rallying to a high of €6.45 by May 2025. This 68.85% return outpaced the German market’s 13.2% gain, driven by technical buy signals, speculation about undervaluation, and optimism around strategic moves like acquisitions. Yet, the company’s financials paint a murkier picture:

The Profit-Loss Paradox

While the stock soared, SBF reported:
- TTM net loss of €1.99 million (vs. a €0.11 loss per share in early 2024).
- EBITDA improved to €0.6 million in 2024, but interest expenses and restructuring costs amplified net losses.
- 2025 projections aim for an EBITDA of €1.5–2.5 million, signaling potential future profitability.

The disconnect arises because investors are betting on future growth, not current earnings. SBF’s order backlog of €100 million+ (as of March 2025) and its pivot toward high-demand sectors like rail infrastructure and defense suggest a turnaround could materialize.

Why the Stock Rose Amid Losses

1. Acquisitions and Strategic Shifts:
   The purchase of Ams Software & Elektronik GmbH (2024) and LUNUX GmbH expanded SBF’s capabilities in software and electronics, aligning with trends in smart rail systems. Investors may see these moves as critical to long-term relevance.

2. Valuation Metrics:
   Despite losses, the P/S ratio of 1.3x and a manageable debt/equity ratio of 29.1% suggest investors are pricing in growth potential. The EV/EBITDA of 116.71, however, hints at overvaluation risks if earnings fail to materialize.

3. Technical Momentum:
   The stock’s beta of 0.67 and short-term rising trends (e.g., a 37% surge in March 2025) attracted momentum traders. Analysts noted buy signals from moving averages and RSI overbought conditions, though these could reverse.

Risks Lurking in the Shadows

• High Volatility: Weekly swings of 14.5% (vs. 6.4% for the German market) make the stock a rollercoaster ride.
• Sector Dependency: SBF’s reliance on rail vehicle manufacturers exposes it to cyclical demand fluctuations and geopolitical risks.
• Execution Risks: Integrating acquisitions and reducing costs remain unproven. A negative free cash flow of €2.8 million (TTM) underscores liquidity pressures.

The Path Forward

SBF’s 2025 outlook hinges on delivering on its EBITDA targets and converting the order backlog into revenue. Key milestones include:
- Cost Reduction: Management aims to cut costs by 10% through automation and operational efficiency.
- Market Expansion: Penetrating defense and climate-tech sectors, which benefit from government spending.

Analysts warn that the 78.97% upside potential cited in May 2025 forecasts assumes perfect execution—a tall order given the company’s history of losses.

Conclusion: A Gamble on Turnaround

Investors in SBF are essentially placing a high-risk, high-reward bet on a turnaround. While the stock’s 68.85% return over the past year is impressive, it rests on assumptions about future earnings and execution.

The key metrics to watch are:
- EBITDA growth: Must hit €1.5–2.5 million in 2025 to validate optimism.
- Cash flow: A positive free cash flow would ease liquidity concerns.
- Revenue stability: Sustained order intake in rail and defense sectors.

For now, SBF’s story is one of speculation over substance. While the stock’s rise reflects faith in its strategy, the path to profitability remains narrow. Only time—and strong financial results—will tell if this gamble pays off.

Data as of May 2025. Past performance does not guarantee future results.