LightwaveRF plc's (LON:LWRF): LightwaveRF plc provides smart home products and software in the United Kingdom, Asia, the Middle East, and rest of Europe. The UK£8.2m market-cap posted a loss in its most recent financial year of -UK£2.5m and a latest trailing-twelve-month loss of -UK£3.0m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is LWRF’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for LWRF’s growth and when analysts expect the company to become profitable.
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According to the 2 industry analysts covering LWRF, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of UK£101k in 2020. Therefore, LWRF is expected to breakeven roughly a couple of months from now! What rate will LWRF have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 107%, which is extremely buoyant. If this rate turns out to be too aggressive, LWRF may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for LWRF 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 I wrap up, there’s one aspect worth mentioning. LWRF has managed its capital prudently, with debt making up 17% of equity. This means that LWRF 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 LWRF which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at LWRF, take a look at LWRF’s company page on Simply Wall St. I’ve also put together a list of essential aspects you should look at:
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Historical Track Record: What has LWRF's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on LightwaveRF’s board and the CEO’s back ground.
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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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