ADM Energy plc's (LON:ADME) Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at ADM Energy plc's (LON:ADME) future prospects. ADM Energy plc operates as a natural resources investment company. The company’s loss has recently broadened since it announced a UK£1.7m loss in the full financial year, compared to the latest trailing-twelve-month loss of UK£2.2m, moving it further away from breakeven. The most pressing concern for investors is ADM Energy's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for ADM Energy

ADM Energy is bordering on breakeven, according to some British Oil and Gas analysts. They expect the company to post a final loss in 2021, before turning a profit of UK£8.2m in 2022. Therefore, the company is expected to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 111%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for ADM Energy given that this is a high-level summary, but, keep in mind that typically 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.

One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 1.2% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on ADM Energy, so if you are interested in understanding the company at a deeper level, take a look at ADM Energy's company page on Simply Wall St. We've also put together a list of important factors you should look at:

1. Valuation: What is ADM Energy 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 ADM Energy 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 ADM 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. 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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