When Can We Expect A Profit From Largo SA (EPA:ALLGO)?

By
Simply Wall St
Published
November 30, 2021
ENXTPA:ALLGO
Source: Shutterstock

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 €25m market-cap company announced a latest loss of €2.4m on 31 December 2020 for its most recent financial year result. As path to profitability is the topic on Largo's investors mind, we've decided to gauge market sentiment. 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

Largo is bordering on breakeven, according to some French Specialty Retail analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of €300k in 2023. Therefore, the company is expected to breakeven roughly 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 48% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
ENXTPA:ALLGO Earnings Per Share Growth December 1st 2021

We're not going to go through company-specific developments for Largo given that this is a high-level summary, though, 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 Largo is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. Oftentimes, losses exist only on paper but other times, it can be a red flag.

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 compiled a list of important factors you should further research:

  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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