Active Energy Group PLC (LON:AEG): Is Breakeven Near?

Active Energy Group PLC (LON:AEG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Active Energy Group PLC engages in the development and commercialization of biomass into renewable energy pellet products in the United Kingdom and internationally. The UK£22m market-cap company posted a loss in its most recent financial year of US$2.5m and a latest trailing-twelve-month loss of US$1.2m shrinking the gap between loss and breakeven. As path to profitability is the topic on Active Energy Group'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 Active Energy Group

According to the 2 industry analysts covering Active Energy Group, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$1.7m in 2022. So, the company is predicted 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 84%, which signals high confidence from analysts. 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 Active Energy Group given that this is a high-level summary, however, take into account that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before we wrap up, there’s one issue worth mentioning. Active Energy Group 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. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Active Energy Group 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 Active Energy Group, take a look at Active Energy Group's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:

1. Historical Track Record: What has Active Energy Group'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 Active Energy Group'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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