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We feel now is a pretty good time to analyse Active Energy Group PLC's (LON:AEG) business as it appears the company may be on the cusp of a considerable accomplishment. Active Energy Group PLC engages in the development and commercialization of biomass into renewable energy pellet products in the United Kingdom and internationally. With the latest financial year loss of US$2.5m and a trailing-twelve-month loss of US$1.2m, the UK£22m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Active Energy Group 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.
Active Energy Group is bordering on breakeven, according to the 2 British Oil and Gas analysts. 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 now. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 84% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Active Energy Group given that this is a high-level summary, but, keep in mind that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
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, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.
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 key factors you should further examine:
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.
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.
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.
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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