Hartshead Resources NL's (ASX:HHR) Profit Outlook

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. The company’s loss has recently broadened since it announced a AU$3.7m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$5.0m, moving it further away from breakeven. The most pressing concern for investors is Hartshead Resources' 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 Hartshead Resources

Hartshead Resources is bordering on breakeven, according to some Australian Oil and Gas analysts. They expect the company to post a final loss in 2024, before turning a profit of AU$236m in 2025. Therefore, the company is expected to breakeven roughly 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 122%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Hartshead Resources given that this is a high-level summary, though, bear in mind that by and large an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

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 usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

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 essential factors you should further examine:

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.