Meitu, Inc. (HKG:1357): Is Breakeven Near?

Meitu, Inc. (HKG:1357) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Meitu, Inc., an investment holding company, operates as a mobile Internet company in the People’s Republic of China. With the latest financial year loss of CN¥336m and a trailing-twelve-month loss of CN¥100m, the HK$6.5b market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Meitu will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Meitu

According to some industry analysts covering Meitu, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of CN¥192m in 2021. The company is therefore projected to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 114%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Meitu's growth isn’t the focus of this broad overview, though, bear in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. Meitu currently has no debt on its balance sheet, which is rare for a loss-making loss-making, growth company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are too many aspects of Meitu to cover in one brief article, but the key fundamentals for the company can all be found in one place – Meitu's company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:

1. Historical Track Record: What has Meitu'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 Meitu'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.

When trading Meitu or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.