Leaf Group Ltd.'s (NYSE:LEAF) Path To Profitability

Leaf Group Ltd. (NYSE:LEAF) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Leaf Group Ltd., together with its subsidiaries, operates as a diversified consumer internet company worldwide. The US$228m market-cap company announced a latest loss of US$8.9m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Leaf Group 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.

View our latest analysis for Leaf Group

According to the 2 industry analysts covering Leaf Group, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$600k in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 41% 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.

Underlying developments driving Leaf Group's growth isn’t the focus of this broad overview, however, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 15% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Leaf Group which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Leaf Group, take a look at Leaf Group's company page on Simply Wall St. We've also compiled a list of essential aspects you should look at:

1. Valuation: What is Leaf 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 Leaf 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 Leaf 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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