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We feel now is a pretty good time to analyse Bowen Coking Coal Limited's (ASX:BCB) business as it appears the company may be on the cusp of a considerable accomplishment. Bowen Coking Coal Limited, together with its subsidiaries, engages in the exploration, development, and production of metallurgical coal in Australia. The AU$23m market-cap company announced a latest loss of AU$95m on 30 June 2024 for its most recent financial year result. The most pressing concern for investors is Bowen Coking Coal's path to profitability – when will it breakeven? 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 Bowen Coking Coal
According to the 2 industry analysts covering Bowen Coking Coal, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of AU$15m in 2025. Therefore, the company is expected to breakeven roughly a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 44%, 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 Bowen Coking Coal given that this is a high-level summary, though, keep in mind that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined 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 we wrap up, there’s one issue worth mentioning. Bowen Coking Coal currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
Next Steps:
There are key fundamentals of Bowen Coking Coal 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 Bowen Coking Coal, take a look at Bowen Coking Coal's company page on Simply Wall St. We've also compiled a list of important aspects you should further examine:
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Valuation: What is Bowen Coking Coal 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 Bowen Coking Coal is currently mispriced by the market.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Bowen Coking Coal’s board and the CEO’s background.
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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.