Loss-Making Liberty Latin America Ltd. (NASDAQ:LILA) Expected To Breakeven In The Medium-Term

Simply Wall St
·3 min read

We feel now is a pretty good time to analyse Liberty Latin America Ltd.'s (NASDAQ:LILA) business as it appears the company may be on the cusp of a considerable accomplishment. Liberty Latin America Ltd., together with its subsidiaries, provides fixed, mobile, and subsea telecommunications services. The company’s loss has recently broadened since it announced a US$80m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$496m, moving it further away from breakeven. Many investors are wondering about the rate at which Liberty Latin America will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Liberty Latin America

Consensus from 7 of the American Telecom analysts is that Liberty Latin America is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$2.0m in 2021. The company is therefore projected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 95%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

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Underlying developments driving Liberty Latin America's growth isn’t the focus of this broad overview, but, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Liberty Latin America is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. 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 Liberty Latin America 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 Liberty Latin America, take a look at Liberty Latin America's company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:

  1. Valuation: What is Liberty Latin America 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 Liberty Latin America 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 Liberty Latin America’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.

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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