Neonode Inc.'s (NASDAQ:NEON) Shift From Loss To Profit

We feel now is a pretty good time to analyse Neonode Inc.'s (NASDAQ:NEON) business as it appears the company may be on the cusp of a considerable accomplishment. Neonode Inc., together with its subsidiaries, develops optical sensing solutions for contactless touch, touch, gesture sensing, and in-cabin monitoring in the United States, Japan, South Korea, China, and internationally. The US$97m market-cap company announced a latest loss of US$5.6m on 31 December 2020 for its most recent financial year result. As path to profitability is the topic on Neonode'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 Neonode

According to the 2 industry analysts covering Neonode, the consensus is that breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of US$44m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. 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 99% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Neonode given that this is a high-level summary, though, bear 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 aspect worth mentioning. Neonode currently has no debt on its balance sheet, which is rare for a loss-making growth company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Neonode 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 Neonode 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 Neonode’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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