When Will Sea Limited (NYSE:SE) Turn A Profit?

November 29, 2018
  •  Updated
September 29, 2022
NYSE:SE
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Sea Limited's (NYSE:SE): Sea Limited engages in the digital entertainment, e-commerce, and digital financial service businesses in the Greater Southeast Asia. The company’s loss has recently broadened since it announced a -US$560.5m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$947.3m, moving it further away from breakeven. As path to profitability is the topic on SE’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for SE’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Sea

Consensus from the 9 Entertainment analysts is SE is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$161m in 2021. Therefore, SE is expected to breakeven roughly 3 years from now. What rate will SE have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 55%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NYSE:SE Past Future Earnings November 29th 18
NYSE:SE Past Future Earnings November 29th 18

Underlying developments driving SE’s growth isn’t the focus of this broad overview, though, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I would like to bring into light with SE is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in SE’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of SE which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at SE, take a look at SE’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further research:

  1. Valuation: What is SE 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 SE 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 back ground.
  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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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