Breakeven On The Horizon For Genex Power Limited (ASX:GNX)

With the business potentially at an important milestone, we thought we'd take a closer look at Genex Power Limited's (ASX:GNX) future prospects. Genex Power Limited engages in the generation and storage of renewable energy in Australia. The AU$147m market-cap company posted a loss in its most recent financial year of AU$11m and a latest trailing-twelve-month loss of AU$5.5m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Genex Power will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Genex Power

Genex Power is bordering on breakeven, according to the 2 Australian Renewable Energy analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$3.5m in 2022. The company is therefore projected to breakeven just over a year from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 47% is expected, which is extremely buoyant. 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 Genex Power given that this is a high-level summary, though, bear in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Genex Power is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. 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 Genex Power 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 Genex Power, take a look at Genex Power's company page on Simply Wall St. We've also compiled a list of important factors you should look at:

1. Historical Track Record: What has Genex Power'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 Genex Power'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. 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.
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