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When Will Life360, Inc. (ASX:360) Become Profitable?

Simply Wall St

Life360, Inc.'s (ASX:360): Life360, Inc. develops and delivers a mobile application in the United States and internationally. On 31 December 2019, the AU$585m market-cap posted a loss of US$29.0m for its most recent financial year. As path to profitability is the topic on 360’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for 360, its year of breakeven and its implied growth rate.

See our latest analysis for Life360

360 is bordering on breakeven, according to the 3 Software analysts. They expect the company to post a final loss in 2021, before turning a profit of US$3.3m in 2022. Therefore, 360 is expected to breakeven roughly 2 years from today. What rate will 360 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 signals high confidence from analysts. If this rate turns out to be too aggressive, 360 may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving 360’s growth isn’t the focus of this broad overview, though, 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 360 has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which typically has high debt relative to its equity. This means that 360 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 360 to cover in one brief article, but the key fundamentals for the company can all be found in one place – 360’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should look at:

  1. Valuation: What is 360 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 360 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 Life360’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.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.