With the business potentially at an important milestone, we thought we'd take a closer look at Liberty Global plc's (NASDAQ:LBTY.A) future prospects. Liberty Global plc, together with its subsidiaries, provides broadband internet, video, fixed-line telephony, and mobile communications services to residential customers and businesses. On 31 December 2020, the US$15b market-cap company posted a loss of US$1.6b for its most recent financial year. The most pressing concern for investors is Liberty Global's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Consensus from 11 of the American Telecom analysts is that Liberty Global is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$887m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 57% is expected, 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.
We're not going to go through company-specific developments for Liberty Global given that this is a high-level summary, though, bear in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with Liberty Global is its debt-to-equity ratio of 120%. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
There are too many aspects of Liberty Global to cover in one brief article, but the key fundamentals for the company can all be found in one place – Liberty Global's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:
- Valuation: What is Liberty Global 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 Global 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 Liberty Global’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.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
