Korean Air Lines Co., Ltd.'s (KRX:003490) Shift From Loss To Profit

With the business potentially at an important milestone, we thought we'd take a closer look at Korean Air Lines Co., Ltd.'s (KRX:003490) future prospects. Korean Air Lines Co., Ltd. provides airline services. On 31 December 2020, the ₩9.5t market-cap company posted a loss of ₩862b for its most recent financial year. As path to profitability is the topic on Korean Air Lines' 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.

View our latest analysis for Korean Air Lines

Consensus from 13 of the South Korean Airlines analysts is that Korean Air Lines is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of ₩105b in 2022. Therefore, the company is expected to breakeven just over a year from today. 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 156% is expected, which signals high confidence from analysts. 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 Korean Air Lines' 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. Korean Air Lines 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 in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Korean Air Lines 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 Korean Air Lines 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 Korean Air Lines’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’re looking to trade Korean Air Lines, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide 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.