Stock Analysis

Harmonic Inc. (NASDAQ:HLIT) Could Be Less Than A Year Away From Profitability

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NasdaqGS:HLIT
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We feel now is a pretty good time to analyse Harmonic Inc.'s (NASDAQ:HLIT) business as it appears the company may be on the cusp of a considerable accomplishment. Harmonic Inc., together with its subsidiaries, provide video delivery software, products, system solutions, and services worldwide. The US$802m market-cap company announced a latest loss of US$29m on 31 December 2020 for its most recent financial year result. As path to profitability is the topic on Harmonic's 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.

Check out our latest analysis for Harmonic

According to the 7 industry analysts covering Harmonic, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$3.1m in 2021. So, the company is predicted to breakeven approximately 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 141% 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
NasdaqGS:HLIT Earnings Per Share Growth March 4th 2021

Underlying developments driving Harmonic's growth isn’t the focus of this broad overview, however, take into account that typically 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. Harmonic currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Harmonic's case is 59%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is Harmonic 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 Harmonic 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 Harmonic’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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What are the risks and opportunities for Harmonic?

Harmonic Inc., together with its subsidiaries, provide video delivery software, products, system solutions, and services worldwide.

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Rewards

  • Earnings are forecast to grow 56.6% per year

  • Earnings grew by 112.6% over the past year

Risks

  • Shareholders have been diluted in the past year

  • Significant insider selling over the past 3 months

View all Risks and Rewards

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