Breakeven Is Near for R.E.A. Holdings plc (LON:RE.)
With the business potentially at an important milestone, we thought we'd take a closer look at R.E.A. Holdings plc's (LON:RE.) future prospects. R.E.A. Holdings plc cultivates oil palms in the province of East Kalimantan in Indonesia. With the latest financial year loss of US$18m and a trailing-twelve-month loss of US$6.6m, the UK£26m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which R.E.A. Holdings will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
View our latest analysis for R.E.A. Holdings
R.E.A. Holdings is bordering on breakeven, according to some British Food analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$11m in 2021. So, the company is predicted to breakeven approximately a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 72% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of R.E.A. Holdings' upcoming projects, but, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. R.E.A. Holdings currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in R.E.A. Holdings' case is 95%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on R.E.A. Holdings, so if you are interested in understanding the company at a deeper level, take a look at R.E.A. Holdings' company page on Simply Wall St. We've also put together a list of pertinent factors you should further examine:
Valuation: What is R.E.A. Holdings 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 R.E.A. Holdings is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on R.E.A. Holdings’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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