Lions Gate Entertainment Corp.’s (NYSE:LGF.A) Path To Profitability


Lions Gate Entertainment Corp. (NYSE:LGF.A) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Lions Gate Entertainment Corp. engages in film, television, subscription, and location-based entertainment businesses in Canada, the United States, and internationally. The US$2.6b market-cap company posted a loss in its most recent financial year of US$19m and a latest trailing-twelve-month loss of US$115m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Lions Gate Entertainment’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.

See our latest analysis for Lions Gate Entertainment

Lions Gate Entertainment is bordering on breakeven, according to the 12 American Entertainment analysts. They expect the company to post a final loss in 2022, before turning a profit of US$12m in 2023. So, the company is predicted to breakeven approximately 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 64% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth

We’re not going to go through company-specific developments for Lions Gate Entertainment given that this is a high-level summary, but, bear in mind that by and large 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. Lions Gate Entertainment currently has a debt-to-equity ratio of 110%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. 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 too many aspects of Lions Gate Entertainment to cover in one brief article, but the key fundamentals for the company can all be found in one place – Lions Gate Entertainment’s company page on Simply Wall St. We’ve also put together a list of key aspects you should further examine:

  1. Valuation: What is Lions Gate Entertainment 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 Lions Gate Entertainment 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 Lions Gate Entertainment’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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.



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