When Will The Lion Electric Company (TSE:LEV) Become Profitable?

By
Simply Wall St
Published
January 07, 2022
TSX:LEV
Source: Shutterstock

We feel now is a pretty good time to analyse The Lion Electric Company's (TSE:LEV) business as it appears the company may be on the cusp of a considerable accomplishment. The Lion Electric Company manufactures all-electric medium and heavy-duty urban vehicles in North America. With the latest financial year loss of US$97m and a trailing-twelve-month loss of US$123m, the CA$2.3b market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Lion Electric 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 Lion Electric

According to the 7 industry analysts covering Lion Electric, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$33m in 2023. The company is therefore projected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 76% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
TSX:LEV Earnings Per Share Growth January 7th 2022

Given this is a high-level overview, we won’t go into details of Lion Electric's upcoming projects, but, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 4.0% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Lion Electric, so if you are interested in understanding the company at a deeper level, take a look at Lion Electric's company page on Simply Wall St. We've also put together a list of relevant factors you should further examine:

  1. Valuation: What is Lion Electric 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 Lion Electric 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 Lion Electric’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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