China Online Education Group's (NYSE:COE): China Online Education Group, through its subsidiaries, provides online English language education services to students in the People's Republic of China and the Philippines. The US$362m market-cap company’s loss lessens since it announced a -CN¥416.7m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -CN¥241.0m, as it approaches breakeven. As path to profitability is the topic on COE’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for COE’s growth and when analysts expect the company to become profitable.
Expectation from Consumer Services analysts is COE is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of CN¥81m in 2021. COE is therefore projected to breakeven around a couple of months from now! How fast will COE have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 104% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving COE’s growth isn’t the focus of this broad overview, though, keep in mind that by and large 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 COE is it currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.
This article is not intended to be a comprehensive analysis on COE, so if you are interested in understanding the company at a deeper level, take a look at COE’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should further research:
- Historical Track Record: What has COE's 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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on China Online Education Group’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.
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