When Will Resolute Energy Corporation (NYSE:REN) Breakeven?

Resolute Energy Corporation’s (NYSE:REN): Resolute Energy Corporation, an independent oil and gas company, engages in the acquisition, exploitation, exploration for, and development of oil and gas properties in the United States. The US$727.82m market-cap posted a loss in its most recent financial year of -US$7.71m and a latest trailing-twelve-month loss of -US$21.91m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on REN’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for REN’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Resolute Energy

Expectation from Oil and Gas analysts is REN is on the verge of breakeven. They anticipate the company to incur a final loss in 2017, before generating positive profits of US$38.97m in 2018. Therefore, REN is expected to breakeven roughly a couple of months from now! How fast will REN have to grow each year in order to reach the breakeven point by 2018? Working backwards from analyst estimates, it turns out that they expect the company to grow 80.76% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, REN may become profitable much later than analysts predict.

NYSE:REN Past Future Earnings June 22nd 18
NYSE:REN Past Future Earnings June 22nd 18

I’m not going to go through company-specific developments for REN given that this is a high-level summary, however, bear in mind that typically an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one issue worth mentioning. REN 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:

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

  1. Valuation: What is REN 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 REN 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 Resolute Energy’s board and the CEO’s back ground.
  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.