We feel now is a pretty good time to analyse Spark Networks SE's (NYSEMKT:LOV) business as it appears the company may be on the cusp of a considerable accomplishment. Spark Networks SE operates online dating sites and mobile applications. With the latest financial year loss of €15m and a trailing-twelve-month loss of €11m, the US$115m market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on Spark Networks' 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.
According to the 2 industry analysts covering Spark Networks, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of €738k in 2020. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 50% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of Spark Networks' 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. Spark Networks currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Spark Networks' case is 56%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Spark Networks, so if you are interested in understanding the company at a deeper level, take a look at Spark Networks' company page on Simply Wall St. We've also compiled a list of important aspects you should further research:
- Valuation: What is Spark Networks 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 Spark Networks is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Spark Networks’s board and the CEO’s background.
- 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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