Sea Limited (NYSE:SE) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Sea Limited engages in the digital entertainment, e-commerce, and digital financial service businesses in Southeast Asia, Latin America, rest of Asia, and internationally. The US$80b market-cap company’s loss lessened since it announced a US$1.5b loss in the full financial year, compared to the latest trailing-twelve-month loss of US$1.2b, as it approaches breakeven. The most pressing concern for investors is Sea's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to the 12 industry analysts covering Sea, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$52m in 2022. So, the company is predicted to breakeven approximately 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 60% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Sea given that this is a high-level summary, but, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. Sea currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company 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.
There are too many aspects of Sea to cover in one brief article, but the key fundamentals for the company can all be found in one place – Sea's company page on Simply Wall St. We've also put together a list of important aspects you should further research:
Valuation: What is Sea 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 Sea 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 Sea’s board and the CEO’s background.
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.
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