Hartshead Resources NL (ASX:HHR): Are Analysts Optimistic?

With the business potentially at an important milestone, we thought we'd take a closer look at Hartshead Resources NL's (ASX:HHR) future prospects. Hartshead Resources NL engages in the oil and gas exploration and development activities in the United Kingdom, Gabon, and Madagascar. With the latest financial year loss of AU$3.7m and a trailing-twelve-month loss of AU$5.0m, the AU$73m market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is Hartshead Resources' 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.

View our latest analysis for Hartshead Resources

Expectations from some of the Australian Oil and Gas analysts is that Hartshead Resources is on the verge of breakeven. They anticipate the company to incur a final loss in 2024, before generating positive profits of AU$81m in 2025. The company is therefore projected to breakeven around 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 48% 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.

Underlying developments driving Hartshead Resources' growth isn’t the focus of this broad overview, but, take into account that by and large energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that Hartshead Resources has no debt on its balance sheet, which is rare for a loss-making oil and gas company, which typically has high 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:

There are key fundamentals of Hartshead Resources which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Hartshead Resources, take a look at Hartshead Resources' company page on Simply Wall St. We've also put together a list of key factors you should further research:

1. Valuation: What is Hartshead Resources 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 Hartshead Resources 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 Hartshead Resources’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.