Renascor Resources Limited’s (ASX:RNU): Renascor Resources Limited engages in the exploration and evaluation of mineral properties in Australia. On 30 June 2018, the AU$21m market-cap posted a loss of -AU$3.4m for its most recent financial year. Many investors are wondering the rate at which RNU will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for RNU’s growth and when analysts expect the company to become profitable.
According to the industry analysts covering RNU, breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of AU$300k in 2020. Therefore, RNU is expected to breakeven roughly 2 years from today. What rate will RNU 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 72%, which signals high confidence from analysts. If this rate turns out to be too aggressive, RNU may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of RNU’s upcoming projects, however, bear in mind that by and large 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.
One thing I’d like to point out is that RNU has no debt on its balance sheet, which is quite unusual for a cash-burning oil and gas company, which typically has high debt relative to its equity. This means that RNU 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.
There are key fundamentals of RNU which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at RNU, take a look at RNU’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should further examine:
- Historical Track Record: What has RNU’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Renascor Resources’s board and the CEO’s back ground.
- 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.