Comet Ridge Limited's (ASX:COI) Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Comet Ridge Limited's (ASX:COI) future prospects. Comet Ridge Limited, together with its subsidiaries, engages in the oil and gas exploration, appraisal, and development activities in Australia. The AU$188m market-cap company posted a loss in its most recent financial year of AU$6.6m and a latest trailing-twelve-month loss of AU$8.6m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Comet Ridge's investors mind, we've decided to gauge market sentiment. 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 Comet Ridge

According to the 3 industry analysts covering Comet Ridge, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2026, before generating positive profits of AU$25m in 2027. So, the company is predicted to breakeven approximately 3 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2027? Working backwards from analyst estimates, it turns out that they expect the company to grow 51% year-on-year, on average, 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.

Given this is a high-level overview, we won’t go into details of Comet Ridge's upcoming projects, though, bear in mind that by and large energy 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 we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 13% of equity. This means that it 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 Comet Ridge to cover in one brief article, but the key fundamentals for the company can all be found in one place – Comet Ridge's company page on Simply Wall St. We've also compiled a list of important factors you should further examine:

1. Valuation: What is Comet Ridge 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 Comet Ridge 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 Comet Ridge’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.

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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@simplywallst.com