Market Sentiment Around Loss-Making R.E.A. Holdings plc (LON:RE.)

R.E.A. Holdings plc (LON:RE.) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. R.E.A. Holdings plc cultivates oil palms in the province of East Kalimantan in Indonesia. The UK£24m market-cap company posted a loss in its most recent financial year of US$18m and a latest trailing-twelve-month loss of US$6.6m shrinking the gap between loss and breakeven. As path to profitability is the topic on R.E.A. Holdings' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for R.E.A. Holdings

R.E.A. Holdings is bordering on breakeven, according to some British Food analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$11m in 2021. The company is therefore projected 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 72%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of R.E.A. Holdings' upcoming projects, but, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. R.E.A. Holdings currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in R.E.A. Holdings' case is 95%. 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 R.E.A. Holdings 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 R.E.A. Holdings, take a look at R.E.A. Holdings' company page on Simply Wall St. We've also compiled a list of relevant factors you should look at:

1. Valuation: What is R.E.A. Holdings 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 R.E.A. Holdings 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 R.E.A. Holdings’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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