Market Sentiment Around Loss-Making CJ CGV Co., Ltd. (KRX:079160)

CJ CGV Co., Ltd.'s (KRX:079160): CJ CGV Co., Ltd. engages in the screening and operation of multiplex theaters in South Korea. The ₩447b market-cap posted a loss in its most recent financial year of -₩152.6b and a latest trailing-twelve-month loss of -₩241.2b leading to an even wider gap between loss and breakeven. The most pressing concern for investors is A079160’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for A079160.

Check out our latest analysis for CJ CGV

A079160 is bordering on breakeven, according to the 15 Entertainment analysts. They expect the company to post a final loss in 2020, before turning a profit of ₩3.2b in 2021. Therefore, A079160 is expected to breakeven roughly a couple of months from now! How fast will A079160 have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 95% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, A079160 may become profitable much later than analysts predict.

Underlying developments driving A079160’s growth isn’t the focus of this broad overview, however, take into account 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 A079160 is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in A079160’s case, it has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of A079160 to cover in one brief article, but the key fundamentals for the company can all be found in one place – A079160’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should further research:

1. Valuation: What is A079160 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 A079160 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 CJ CGV’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.

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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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