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American Resources Corporation (NASDAQ:AREC): Is Breakeven Near?

Simply Wall St

We feel now is a pretty good time to analyse American Resources Corporation's (NASDAQ:AREC) business as it appears the company may be on the cusp of a considerable accomplishment. American Resources Corporation supplies raw materials for global infrastructure marketplace. The US$33m market-cap company posted a loss in its most recent financial year of US$70.9m and a latest trailing-twelve-month loss of US$49.3m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which American Resources will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for American Resources

According to some industry analysts covering American Resources, breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits 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 167% 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.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving American Resources' growth isn’t the focus of this broad overview, 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. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we would like to bring into light with American Resources is it currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are key fundamentals of American Resources 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 American Resources, take a look at American Resources' company page on Simply Wall St. We've also put together a list of relevant aspects you should look at:

  1. Historical Track Record: What has American Resources' 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.

  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' 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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.