Genex Power Limited’s (ASX:GNX): Genex Power Limited engages in the generation and storage of renewable energy in Australia. The AU$85m market-cap company announced a latest loss of -AU$7.5m on 30 June 2018 for its most recent financial year result. Many investors are wondering the rate at which GNX will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for GNX, its year of breakeven and its implied growth rate.
View our latest analysis for Genex Power
Expectation from Renewable Energy analysts is GNX is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of AU$1.3m in 2020. Therefore, GNX is expected to breakeven roughly a few months from now. How fast will GNX have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 113% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, GNX may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for GNX given that this is a high-level summary, but, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. GNX currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in GNX’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
Next Steps:
There are key fundamentals of GNX which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at GNX, take a look at GNX’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should further examine:
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Valuation: What is GNX 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 GNX 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 Genex Power’s board and the CEO’s back ground.
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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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.