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Breakeven Is Near for Allegiance Coal Limited (ASX:AHQ)

Simply Wall St

We feel now is a pretty good time to analyse Allegiance Coal Limited's (ASX:AHQ) business as it appears the company may be on the cusp of a considerable accomplishment. Allegiance Coal Limited engages in the acquisition, exploration, and development of coal tenements. The AU$43m market-cap company announced a latest loss of AU$9.2m on 30 June 2020 for its most recent financial year result. Many investors are wondering about the rate at which Allegiance Coal 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.

See our latest analysis for Allegiance Coal

Expectations from some of the Australian Metals and Mining analysts is that Allegiance Coal is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of AU$13m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 110% 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

We're not going to go through company-specific developments for Allegiance Coal given that this is a high-level summary, though, take into account that typically 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 28% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

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

  1. Historical Track Record: What has Allegiance Coal'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.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Allegiance Coal's 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.