Bowen Coking Coal Limited (ASX:BCB) Has Found A Path To Profitability

Bowen Coking Coal Limited (ASX:BCB) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Bowen Coking Coal Limited, together with its subsidiaries, engages in the exploration, development, and production of metallurgical coal in Australia. The AU$159m market-cap company posted a loss in its most recent financial year of AU$163m and a latest trailing-twelve-month loss of AU$167m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Bowen Coking Coal'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 Bowen Coking Coal

Bowen Coking Coal is bordering on breakeven, according to some Australian Metals and Mining analysts. They expect the company to post a final loss in 2023, before turning a profit of AU$189m in 2024. So, the company is predicted to breakeven approximately 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 110% is expected, 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.

We're not going to go through company-specific developments for Bowen Coking Coal given that this is a high-level summary, but, take into account that generally metals and mining companies, depending on the stage of operation and metals mined, 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 issue worth mentioning. Bowen Coking Coal currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Bowen Coking Coal 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 Bowen Coking Coal, take a look at Bowen Coking Coal's company page on Simply Wall St. We've also compiled a list of key factors you should look at:

1. Valuation: What is Bowen Coking Coal 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 Bowen Coking Coal 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 Bowen Coking Coal’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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.