We Might See A Profit From Meitu, Inc. (HKG:1357) Soon

We feel now is a pretty good time to analyse Meitu, Inc.'s (HKG:1357) business as it appears the company may be on the cusp of a considerable accomplishment. Meitu, Inc., an investment holding company, operates as a mobile Internet company in the People’s Republic of China. The HK$12b market-cap company’s loss lessened since it announced a CN¥336m loss in the full financial year, compared to the latest trailing-twelve-month loss of CN¥100m, as it approaches 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?” 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 Meitu

Meitu is bordering on breakeven, according to some Hong Kong Interactive Media and Services analysts. They expect the company to post a final loss in 2020, before turning a profit of CN¥97m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 119% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Meitu's upcoming projects, however, take into account that typically 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. Meitu currently has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Meitu 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 Meitu, take a look at Meitu's company page on Simply Wall St. We've also put together 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.

If you decide to trade Meitu, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all 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 (at) simplywallst.com.