American Resources Corporation (NASDAQ:AREC) Is About To Turn The Corner

With the business potentially at an important milestone, we thought we'd take a closer look at American Resources Corporation's (NASDAQ:AREC) future prospects. American Resources Corporation, together with its subsidiaries, extracts, processes, transports, and sells metallurgical coal to the steel and industrial industries. The US$45m market-cap company posted a loss in its most recent financial year of US$11m and a latest trailing-twelve-month loss of US$19m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which American Resources will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for American Resources

According to the 2 industry analysts covering American Resources, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$3.1m in 2025. So, the company is predicted to breakeven approximately 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 123% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving American Resources' growth isn’t the focus of this broad overview, but, bear in mind that typically an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. American Resources currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are too many aspects of American Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – American Resources' company page on Simply Wall St. We've also put together a list of pertinent factors you should further research:

1. Historical Track Record: What has American Resources' 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 American Resources' 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.