With the business potentially at an important milestone, we thought we'd take a closer look at Applied Optoelectronics, Inc.'s (NASDAQ:AAOI) future prospects. Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States and China. The US$465m market-cap company announced a latest loss of US$56m on 31 December 2023 for its most recent financial year result. The most pressing concern for investors is Applied Optoelectronics' path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Applied Optoelectronics is bordering on breakeven, according to the 4 American Communications analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$36m in 2025. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 134% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
NasdaqGM:AAOI Earnings Per Share Growth April 11th 2024
Underlying developments driving Applied Optoelectronics' growth isn't the focus of this broad overview, though, bear 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. Typically, debt shouldn't exceed 40% of your equity, which in Applied Optoelectronics' case is 54%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Applied Optoelectronics, so if you are interested in understanding the company at a deeper level, take a look at Applied Optoelectronics' company page on Simply Wall St. We've also compiled a list of important aspects you should look at:
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.
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.
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.