Buru Energy Limited’s (ASX:BRU) Shift From Loss To Profit

Buru Energy Limited’s (ASX:BRU): Buru Energy Limited engages in the exploration, development, and production of oil and gas resources in Western Australia. On 31 December 2017, the AU$157.71m market-cap posted a loss of -AU$6.20m for its most recent financial year. Many investors are wondering the rate at which BRU will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for BRU.

View out our latest analysis for Buru Energy

Expectation from Oil and Gas analysts is BRU is on the verge of breakeven. They anticipate the company to incur a final loss in 2017, before generating positive profits of AU$35.00m in 2018. BRU is therefore projected to breakeven around a few months from now. How fast will BRU have to grow each year in order to reach the breakeven point by 2018? Working backwards from analyst estimates, it turns out that they expect the company to grow 55.96% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, BRU may become profitable much later than analysts predict.

ASX:BRU Past Future Earnings June 20th 18
ASX:BRU Past Future Earnings June 20th 18

Underlying developments driving BRU’s growth isn’t the focus of this broad overview, though, take into account that generally an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one aspect worth mentioning. BRU has managed its capital judiciously, with debt making up 11.70% of equity. This means that BRU has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of BRU to cover in one brief article, but the key fundamentals for the company can all be found in one place – BRU’s company page on Simply Wall St. I’ve also put together a list of important aspects you should further research:

  1. Valuation: What is BRU 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 BRU 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 Buru Energy’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.