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Harmonic Inc.'s (NASDAQ:HLIT) Profit Outlook

Simply Wall St

Harmonic Inc.'s (NASDAQ:HLIT): Harmonic Inc. designs, manufactures, and sells video infrastructure products and system solutions worldwide. The company’s loss has recently broadened since it announced a -US$21.0m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$27.6m, moving it further away from breakeven. As path to profitability is the topic on HLIT’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for HLIT, its year of breakeven and its implied growth rate.

View our latest analysis for Harmonic

HLIT is bordering on breakeven, according to the 6 Communications analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$31m in 2021. So, HLIT is predicted to breakeven approximately 2 years from now. How fast will HLIT 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 108% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, HLIT may become profitable much later than analysts predict.

NasdaqGS:HLIT Past and Future Earnings, August 27th 2019

I’m not going to go through company-specific developments for HLIT given that this is a high-level summary, but, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one issue worth mentioning. HLIT currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in HLIT’s case is 64%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of HLIT 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 HLIT, take a look at HLIT’s company page on Simply Wall St. I’ve also compiled a list of relevant factors you should further examine:

  1. Historical Track Record: What has HLIT'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.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Harmonic’s board and the CEO’s back ground.
  3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.