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When Will Gevo, Inc. (NASDAQ:GEVO) Become Profitable?

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·3 min read
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Gevo, Inc.'s (NASDAQ:GEVO): Gevo, Inc., a renewable chemicals and low-carbon fuel company, focuses on the development and commercialization of renewable alternatives to petroleum-based products in the United States. The company’s loss has recently broadened since it announced a -US$28.0m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$28.9m, moving it further away from breakeven. Many investors are wondering the rate at which GEVO 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 GEVO, its year of breakeven and its implied growth rate.

View our latest analysis for Gevo

Expectation from Oil and Gas analysts is GEVO is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$1.5m in 2022. So, GEVO is predicted to breakeven approximately 2 years from now. What rate will GEVO have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 62%, which is extremely buoyant. If this rate turns out to be too aggressive, GEVO may become profitable much later than analysts predict.

NasdaqCM:GEVO Past and Future Earnings, February 4th 2020
NasdaqCM:GEVO Past and Future Earnings, February 4th 2020

Underlying developments driving GEVO’s growth isn’t the focus of this broad overview, however, bear in mind that typically an energy business has lumpy cash flows which are contingent on the natural resource 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 I wrap up, there’s one aspect worth mentioning. GEVO has managed its capital judiciously, with debt making up 18% of equity. This means that GEVO 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 GEVO to cover in one brief article, but the key fundamentals for the company can all be found in one place – GEVO’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should look at:

  1. Historical Track Record: What has GEVO'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 Gevo’s board and the CEO’s back ground.

  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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.