When Will CJ CGV Co., Ltd. (KRX:079160) Become Profitable?

With the business potentially at an important milestone, we thought we'd take a closer look at CJ CGV Co., Ltd.'s (KRX:079160) future prospects. CJ CGV Co., Ltd. engages in the screening and operation of multiplex theaters in South Korea. On 31 December 2020, the ₩893b market-cap company posted a loss of ₩635b for its most recent financial year. The most pressing concern for investors is CJ CGV's path to profitability – when will it breakeven? 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 CJ CGV

According to the 13 industry analysts covering CJ CGV, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of ₩25b in 2023. The company is therefore projected to breakeven around 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 121% 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.

Given this is a high-level overview, we won’t go into details of CJ CGV's upcoming projects, but, keep in mind 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 issue worth mentioning. CJ CGV currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is CJ CGV 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 CJ CGV 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 CJ CGV’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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