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Carbon Revolution Limited's (ASX:CBR) Path To Profitability

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Carbon Revolution Limited (ASX:CBR) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Carbon Revolution Limited designs, manufactures, and markets single piece carbon fiber wheels to original equipment manufacturers worldwide. The AU$412m market-cap company announced a latest loss of AU$114m on 30 June 2020 for its most recent financial year result. As path to profitability is the topic on Carbon Revolution's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Carbon Revolution

Carbon Revolution is bordering on breakeven, according to the 2 Australian Auto Components analysts. They expect the company to post a final loss in 2022, before turning a profit of AU$7.8m in 2023. So, the company is predicted to breakeven approximately 2 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 82%, which is rather optimistic! 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 Carbon Revolution given that this is a high-level summary, however, take into account that generally 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 21% 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 key fundamentals of Carbon Revolution 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 Carbon Revolution, take a look at Carbon Revolution's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further examine:

  1. Valuation: What is Carbon Revolution 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 Carbon Revolution is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Carbon Revolution’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 (at) simplywallst.com.