Analysts Are Optimistic We'll See A Profit From Lotte Shopping Co., Ltd. (KRX:023530)

We feel now is a pretty good time to analyse Lotte Shopping Co., Ltd.'s (KRX:023530) business as it appears the company may be on the cusp of a considerable accomplishment. Lotte Shopping Co., Ltd. engages in the retail operations through department stores, outlet stores, discount stores, supermarkets, health and beauty stores, specialty stores, home shopping, online malls, and convenience stores channels. With the latest financial year loss of ₩964b and a trailing-twelve-month loss of ₩1.4t, the ₩3.3t market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is Lotte Shopping's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Lotte Shopping

Consensus from 21 of the South Korean Multiline Retail analysts is that Lotte Shopping is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of ₩140b 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 58% year-on-year, on average, 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 Lotte Shopping given that this is a high-level summary, however, bear 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. Lotte Shopping currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Lotte Shopping's case is 91%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Lotte Shopping, so if you are interested in understanding the company at a deeper level, take a look at Lotte Shopping's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should look at:

1. Valuation: What is Lotte Shopping 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 Lotte Shopping 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 Lotte Shopping’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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