Market Sentiment Around Loss-Making Largo SA (EPA:ALLGO)

Largo SA (EPA:ALLGO) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Largo SA refurbishes smartphones, tablets, and laptops in France. The €6.0m market-cap company announced a latest loss of €5.0m on 31 December 2022 for its most recent financial year result. The most pressing concern for investors is Largo's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Largo

Largo is bordering on breakeven, according to the 2 French Specialty Retail analysts. They expect the company to post a final loss in 2024, before turning a profit of €1.1m in 2025. The company is therefore projected to breakeven around 2 years from now. 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 74% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Largo given that this is a high-level summary, but, take into account that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

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 around investing in the loss-making company.

Next Steps:

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

1. Historical Track Record: What has Largo's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.