Lotte Shopping Co., Ltd. (KRX:023530) Is About To Turn The Corner

With the business potentially at an important milestone, we thought we'd take a closer look at Lotte Shopping Co., Ltd.'s (KRX:023530) future prospects. 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. The ₩3.5t market-cap company announced a latest loss of ₩810b on 31 December 2020 for its most recent financial year result. As path to profitability is the topic on Lotte Shopping's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Lotte Shopping

Lotte Shopping is bordering on breakeven, according to the 21 South Korean Multiline Retail analysts. They expect the company to post a final loss in 2020, before turning a profit of ₩183b 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 108% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Lotte Shopping's growth isn’t the focus of this broad overview, though, take into account 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. Lotte Shopping currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Lotte Shopping's case is 92%. A higher level of debt requires more stringent capital management which increases the risk in 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 factors 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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