We feel now is a pretty good time to analyse Applied Optoelectronics, Inc.'s (NASDAQ:AAOI) business as it appears the company may be on the cusp of a considerable accomplishment. Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States, Taiwan, and China. With the latest financial year loss of US$56m and a trailing-twelve-month loss of US$81m, the US$732m market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Applied Optoelectronics' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Applied Optoelectronics

Applied Optoelectronics is bordering on breakeven, according to the 4 American Communications analysts. They expect the company to post a final loss in 2024, before turning a profit of US$35m in 2025. So, the company is predicted to breakeven just over a year from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 155% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Applied Optoelectronics' growth isn’t the focus of this broad overview, though, 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.

Before we wrap up, there’s one issue worth mentioning. Applied Optoelectronics currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Applied Optoelectronics' case is 55%. 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 Applied Optoelectronics to cover in one brief article, but the key fundamentals for the company can all be found in one place – Applied Optoelectronics' company page on Simply Wall St. We've also put together 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.