When Will American Resources Corporation (NASDAQ:AREC) Turn A Profit?

American Resources Corporation (NASDAQ:AREC) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. American Resources Corporation supplies raw materials for the global infrastructure marketplace. The US$59m market-cap company’s loss lessened since it announced a US$71m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$42m, as it approaches breakeven. As path to profitability is the topic on American Resources' investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for American Resources

Consensus from 2 of the American Oil and Gas analysts is that American Resources is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$10m in 2021. So, the company is predicted to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 179% year-on-year, on average, 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 American Resources given that this is a high-level summary, however, keep in mind that generally 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.

One thing we would like to bring into light with American Resources is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

This article is not intended to be a comprehensive analysis on American Resources, so if you are interested in understanding the company at a deeper level, take a look at American Resources' company page on Simply Wall St. We've also put together a list of essential aspects you should further examine:

1. Valuation: What is American Resources 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 American Resources 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 American Resources’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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