When Will Renascor Resources Limited (ASX:RNU) Become Profitable?

Renascor Resources Limited’s (ASX:RNU): Renascor Resources Limited engages in the exploration and evaluation of mineral properties in Australia. With the latest financial year loss of -AU$3.4m and a trailing-twelve month of -AU$1.5m, the AU$20m market-cap alleviates its loss by moving closer towards its target of breakeven. Many investors are wondering the rate at which RNU 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 RNU.

View our latest analysis for Renascor Resources

Expectation from Oil and Gas analysts is RNU is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of AU$1.2m in 2021. Therefore, RNU is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which RNU must grow year-on-year. It turns out an average annual growth rate of 87% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, RNU may become profitable much later than analysts predict.

ASX:RNU Past and Future Earnings, March 18th 2019
ASX:RNU Past and Future Earnings, March 18th 2019

Given this is a high-level overview, I won’t go into details of RNU’s upcoming projects, 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 that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing I’d like to point out is that RNU 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. RNU 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:

This article is not intended to be a comprehensive analysis on RNU, so if you are interested in understanding the company at a deeper level, take a look at RNU’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should look at:

  1. 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.
  2. 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.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.