Breakeven On The Horizon For Largo SA (EPA:ALLGO)

With the business potentially at an important milestone, we thought we'd take a closer look at Largo SA's (EPA:ALLGO) future prospects. Largo SA refurbishes smartphones, tablets, and laptops in France. The €7.7m market-cap company announced a latest loss of €5.0m on 31 December 2022 for its most recent financial year result. Many investors are wondering about the rate at which Largo 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.

View our latest analysis for Largo

According to the 2 industry analysts covering Largo, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of €450k in 2025. Therefore, the company is expected to breakeven roughly 2 years from today. 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 75% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Largo'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 we would like to bring into light with Largo is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Largo's case is 50%. 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 key fundamentals of Largo which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Largo, take a look at Largo's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:

1. Valuation: What is Largo 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 Largo 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 Largo’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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.