Loss-Making Africa Energy Corp. (CVE:AFE) Expected To Breakeven In The Medium-Term

We feel now is a pretty good time to analyse Africa Energy Corp.'s (CVE:AFE) business as it appears the company may be on the cusp of a considerable accomplishment. Africa Energy Corp. operates as an oil and gas exploration company in South Africa. The CA$72m market-cap company posted a loss in its most recent financial year of US$101m and a latest trailing-twelve-month loss of US$2.6m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Africa Energy will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

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Expectations from some of the Canadian Oil and Gas analysts is that Africa Energy is on the verge of breakeven. They expect the company to post a final loss in 2025, before turning a profit of US$3.9m in 2026. The company is therefore projected to breakeven just over a year from today. 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 218% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Africa Energy's growth isn’t the focus of this broad overview, though, bear in mind that by and large energy companies, depending on the stage of operation and resource produced, 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.

View our latest analysis for Africa Energy

Before we wrap up, there’s one aspect worth mentioning. Africa Energy currently has no debt on its balance sheet, which is quite unusual for a cash-burning 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 Africa Energy 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 Africa Energy, take a look at Africa Energy's company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:

1. Historical Track Record: What has Africa Energy'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 Africa Energy'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.