Sea Limited's (NYSE:SE) Path To Profitability

By
Simply Wall St
Published
June 07, 2021
NYSE:SE
Source: Shutterstock

Sea Limited (NYSE:SE) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Sea Limited, together with its subsidiaries, engages in the digital entertainment, e-commerce, and digital financial service businesses in Southeast Asia, Latin America, rest of Asia, and internationally. The company’s loss has recently broadened since it announced a US$1.6b loss in the full financial year, compared to the latest trailing-twelve-month loss of US$1.8b, moving it further away from breakeven. Many investors are wondering about the rate at which Sea will turn a profit, with the big question being “when will the company 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 Sea

According to the 15 industry analysts covering Sea, the consensus is that breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of US$228m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. 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 66% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NYSE:SE Earnings Per Share Growth June 7th 2021

Given this is a high-level overview, we won’t go into details of Sea's upcoming projects, but, 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.

One thing we would like to bring into light with Sea is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Sea's case is 51%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is Sea 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 Sea 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 Sea’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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.