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Liberty Latin America Ltd.'s (NASDAQ:LILA): Liberty Latin America Ltd., together with its subsidiaries, provides fixed, mobile, and subsea telecommunications services. On 31 December 2019, the US$1.8b market-cap posted a loss of -US$80.1m for its most recent financial year. Many investors are wondering the rate at which LILA will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for LILA’s growth and when analysts expect the company to become profitable.
According to the 9 industry analysts covering LILA, the consensus is breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$83m in 2022. LILA is therefore projected to breakeven around 2 years from now. What rate will LILA 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 63%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of LILA’s upcoming projects, however, 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 LILA is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and LILA has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on LILA, so if you are interested in understanding the company at a deeper level, take a look at LILA’s company page on Simply Wall St. I’ve also compiled a list of relevant factors you should further examine:
Valuation: What is LILA 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 LILA 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 Liberty Latin America’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 email@example.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.
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