Telefónica Deutschland Holding AG’s (FRA:O2D) Shift From Loss To Profit

Telefónica Deutschland Holding AG’s (FRA:O2D): Telefónica Deutschland Holding AG provides telecommunication and connectivity solutions to private and business customers in Germany. The €8.4b market-cap company announced a latest loss of -€230.0m on 31 December 2018 for its most recent financial year result. The most pressing concern for investors is O2D’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for O2D, its year of breakeven and its implied growth rate.

See our latest analysis for Telefónica Deutschland Holding

O2D is bordering on breakeven, according to the 22 Telecom analysts. They anticipate the company to incur a final loss in 2019, before generating positive profits of €53m in 2020. O2D is therefore projected to breakeven around a couple of months from now! How fast will O2D have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 68% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

DB:O2D Past and Future Earnings, April 3rd 2019
DB:O2D Past and Future Earnings, April 3rd 2019

Underlying developments driving O2D’s growth isn’t the focus of this broad overview, but, bear in mind that typically 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. O2D has managed its capital judiciously, with debt making up 28% of equity. This means that O2D 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:

There are too many aspects of O2D to cover in one brief article, but the key fundamentals for the company can all be found in one place – O2D’s company page on Simply Wall St. I’ve also put together a list of key factors you should look at:

  1. Valuation: What is O2D 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 O2D 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 Telefónica Deutschland Holding’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.