Analysts Are Optimistic We'll See A Profit From LuxNet Corporation (GTSM:4979)

With the business potentially at an important milestone, we thought we'd take a closer look at LuxNet Corporation's (GTSM:4979) future prospects. LuxNet Corporation designs, develops, and manufactures optical semiconductor devices and packaged optical components in Taiwan. With the latest financial year loss of NT$208m and a trailing-twelve-month loss of NT$75m, the NT$2.6b market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on LuxNet's investors mind, we've decided to gauge market sentiment. 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 LuxNet

According to some industry analysts covering LuxNet, breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of NT$87m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 194%, 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 LuxNet given that this is a high-level summary, though, bear 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. LuxNet currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in LuxNet's case is 47%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

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

1. Historical Track Record: What has LuxNet's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on LuxNet'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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