Loss-Making Hyundai Rotem Company (KRX:064350) Set To Breakeven

We feel now is a pretty good time to analyse Hyundai Rotem Company's (KRX:064350) business as it appears the company may be on the cusp of a considerable accomplishment. Hyundai Rotem Company manufactures and sells railway vehicles, defense systems, and plants and machinery in South Korea and internationally. The ₩2.2t market-cap company posted a loss in its most recent financial year of ₩354b and a latest trailing-twelve-month loss of ₩157b shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Hyundai Rotem 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.

Check out our latest analysis for Hyundai Rotem

According to the 3 industry analysts covering Hyundai Rotem, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of ₩45b in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 49% year-on-year, on average, 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 Hyundai Rotem given that this is a high-level summary, but, keep in mind that by and large 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 issue worth mentioning. Hyundai Rotem currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Hyundai Rotem's case is 70%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Hyundai Rotem 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 Hyundai Rotem, take a look at Hyundai Rotem's company page on Simply Wall St. We've also compiled a list of essential aspects you should look at:

1. Valuation: What is Hyundai Rotem 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 Hyundai Rotem 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 Hyundai Rotem’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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