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The Lovesac Company's (NASDAQ:LOVE) Profit Outlook

Simply Wall St

The Lovesac Company's (NASDAQ:LOVE): The Lovesac Company designs, manufactures, and sells foam filled furniture, sectional couches, and related accessories. The company’s loss has recently broadened since it announced a -US$34.5m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$36.1m, moving it further away from breakeven. The most pressing concern for investors is LOVE’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for LOVE’s growth and when analysts expect the company to become profitable.

View our latest analysis for Lovesac

Consensus from the 6 Consumer Durables analysts is LOVE is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$3.8m in 2022. Therefore, LOVE is expected to breakeven roughly 3 years from today. In order to meet this breakeven date, I calculated the rate at which LOVE must grow year-on-year. It turns out an average annual growth rate of 62% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, LOVE may become profitable much later than analysts predict.

NasdaqGM:LOVE Past and Future Earnings, August 27th 2019

Given this is a high-level overview, I won’t go into details of LOVE’s upcoming projects, however, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before I wrap up, there’s one aspect worth mentioning. LOVE currently has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which usually has a high level of debt relative to its equity. This means that LOVE 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 LOVE to cover in one brief article, but the key fundamentals for the company can all be found in one place – LOVE’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should further examine:

  1. Valuation: What is LOVE 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 LOVE 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 Lovesac’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.