Market Sentiment Around Loss-Making Berkeley Energia Limited (ASX:BKY)

Berkeley Energia Limited's (ASX:BKY): Berkeley Energia Limited engages in the exploration and development of uranium properties in Spain. With the latest financial year loss of -AU$16.05m and a trailing-twelve month of -AU$50.25m, the AU$205.02m market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which BKY will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for BKY’s growth and when analysts expect the company to become profitable.

According to the industry analysts covering BKY, breakeven is near. They expect the company to post a final loss in -1, before turning a profit of AU$0 in . So, BKY is predicted to breakeven approximately a few months from now. What rate will BKY have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 81.35%, which signals high confidence from analysts. If this rate turns out to be too aggressive, BKY may become profitable much later than analysts predict.

Underlying developments driving BKY’s growth isn’t the focus of this broad overview, however, take into account that typically oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one issue worth mentioning. BKY currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in BKY’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is BKY 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 BKY 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 Berkeley Energia’s board and the CEO’s back ground.
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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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.