When Will Loungers plc (LON:LGRS) Turn A Profit?

With the business potentially at an important milestone, we thought we'd take a closer look at Loungers plc's (LON:LGRS) future prospects. Loungers plc operates cafés, bars, and restaurants under the Lounge and Cosy Club brands in England and Wales. The UK£268m market-cap company’s loss lessened since it announced a UK£13m loss in the full financial year, compared to the latest trailing-twelve-month loss of UK£11m, as it approaches breakeven. As path to profitability is the topic on Loungers' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Loungers

Consensus from 3 of the British Hospitality analysts is that Loungers is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of UK£15m in 2022. Therefore, the company is expected to breakeven just over a year 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 65% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Loungers given that this is a high-level summary, 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 judiciously, with debt making up 32% 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 Loungers, so if you are interested in understanding the company at a deeper level, take a look at Loungers' company page on Simply Wall St. We've also put together a list of important factors you should look at:

1. Valuation: What is Loungers 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 Loungers 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 Loungers’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. 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.
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