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iCar Asia Limited's (ASX:ICQ) Path To Profitability

Simply Wall St

iCar Asia Limited's (ASX:ICQ): iCar Asia Limited develops and operates Internet based automotive portals for used and new car buyers in South East Asia. The AU$115m market-cap company’s loss lessens since it announced a -AU$13.6m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -AU$12.5m, as it approaches breakeven. The most pressing concern for investors is ICQ’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for ICQ.

Check out our latest analysis for iCar Asia

ICQ is bordering on breakeven, according to Online Retail analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$3.1m in 2022. ICQ is therefore projected to breakeven around 3 years from today. What rate will ICQ have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 68%, which is extremely buoyant. If this rate turns out to be too aggressive, ICQ may become profitable much later than analysts predict.

ASX:ICQ Past and Future Earnings, September 24th 2019

I’m not going to go through company-specific developments for ICQ given that this is a high-level summary, however, 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.

One thing I’d like to point out is that ICQ has no debt on its balance sheet, which is rare for a loss-making loss-making, growth company, which typically has high debt relative to its equity. This means that ICQ has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of ICQ to cover in one brief article, but the key fundamentals for the company can all be found in one place – ICQ’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should further examine:

  1. Valuation: What is ICQ 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 ICQ is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on iCar Asia’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.