China Online Education Group (NYSE:COE) Is About To Turn The Corner

China Online Education Group (NYSE:COE) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. China Online Education Group, through its subsidiaries, provides online English language education services to students in the People's Republic of China and the Philippines. The company’s loss has recently broadened since it announced a CN¥104m loss in the full financial year, compared to the latest trailing-twelve-month loss of CN¥325m, moving it further away from breakeven. The most pressing concern for investors is China Online Education Group's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for China Online Education Group

China Online Education Group is bordering on breakeven, according to the 2 American Consumer Services analysts. They expect the company to post a final loss in 2020, before turning a profit of CN¥168m in 2021. So, the company is predicted to breakeven approximately a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 108% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for China Online Education Group given that this is a high-level summary, however, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with China Online Education Group is it currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

This article is not intended to be a comprehensive analysis on China Online Education Group, so if you are interested in understanding the company at a deeper level, take a look at China Online Education Group's company page on Simply Wall St. We've also put together a list of important aspects you should further research:

1. Valuation: What is China Online Education Group 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 China Online Education Group 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 China Online Education Group’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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