Loss-Making Applied Optoelectronics, Inc. (NASDAQ:AAOI) Set To Breakeven

Applied Optoelectronics, Inc. (NASDAQ:AAOI) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Applied Optoelectronics, Inc. designs, manufactures, and sells various fiber-optic networking products worldwide. The US$569m market-cap company posted a loss in its most recent financial year of US$66m and a latest trailing-twelve-month loss of US$62m shrinking the gap between loss and breakeven. The most pressing concern for investors is Applied Optoelectronics' path to profitability – when will it 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 Applied Optoelectronics

Applied Optoelectronics is bordering on breakeven, according to the 3 American Communications analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$3.7m in 2024. 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 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 116% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Applied Optoelectronics' growth isn’t the focus of this broad overview, though, take into account that typically 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 Applied Optoelectronics is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Applied Optoelectronics' case is 71%. 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 Applied Optoelectronics 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 Applied Optoelectronics, take a look at Applied Optoelectronics' company page on Simply Wall St. We've also compiled a list of relevant factors you should further examine:

1. Valuation: What is Applied Optoelectronics 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 Applied Optoelectronics 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 Applied Optoelectronics’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. 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. Simply Wall St has no position in any stocks mentioned.