Americanas S.A. (BVMF:AMER3) Is About To Turn The Corner

Americanas S.A. (BVMF:AMER3) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Americanas S.A. operates in the e-commerce business in Brazil. The R$48b market-cap company posted a loss in its most recent financial year of R$211m and a latest trailing-twelve-month loss of R$266m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Americanas will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Americanas

Consensus from 11 of the Brazilian Online Retail analysts is that Americanas is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of R$198m in 2021. So, the company is predicted to breakeven approximately a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 49% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Americanas' upcoming projects, but, bear 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 we would like to bring into light with Americanas is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Americanas' case is 55%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Americanas 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 Americanas 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 Americanas’s board and the CEO’s background.
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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