Breakeven Is Near for iHuman Inc. (NYSE:IH)

iHuman Inc. (NYSE:IH) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. iHuman Inc. provides childhood edutainment products and services to individual users, education organizations, and distributors in the People's Republic of China. The US$478m market-cap company announced a latest loss of CN¥48m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is iHuman's 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.

View our latest analysis for iHuman

Consensus from 2 of the American Entertainment analysts is that iHuman is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of CN¥7.0m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 117%, 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

Underlying developments driving iHuman's growth isn’t the focus of this broad overview, though, keep in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. iHuman currently has no debt on its balance sheet, which is rare for a loss-making growth company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on iHuman, so if you are interested in understanding the company at a deeper level, take a look at iHuman's company page on Simply Wall St. We've also put together a list of important factors you should further research:

1. Valuation: What is iHuman 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 iHuman 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 iHuman’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. 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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