Sea Limited's (NYSE:SE): Sea Limited engages in the digital entertainment, e-commerce, and digital financial service businesses in Taiwan, Thailand, Vietnam, Indonesia, and internationally. The US$29b market-cap company announced a latest loss of -US$1.5b on 31 December 2019 for its most recent financial year result. The most pressing concern for investors is SE’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for SE’s growth and when analysts expect the company to become profitable.
According to the 8 industry analysts covering SE, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$372m in 2022. Therefore, SE is expected to breakeven roughly 2 years from now. How fast will SE have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 59% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, SE may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of SE’s upcoming projects, though, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing I would like to bring into light with SE is its debt-to-equity ratio of 118%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in SE’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are key fundamentals of SE which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at SE, take a look at SE’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should further examine:
- Valuation: What is SE 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 SE 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 Sea’s board and the CEO’s back ground.
- 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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