Loss-Making Bowen Coking Coal Limited (ASX:BCB) Set To Breakeven
With the business potentially at an important milestone, we thought we'd take a closer look at Bowen Coking Coal Limited's (ASX:BCB) future prospects. Bowen Coking Coal Limited, together with its subsidiaries, engages in the exploration and development of metallurgical coal in Australia. The AU$604m market-cap company announced a latest loss of AU$18m on 30 June 2022 for its most recent financial year result. As path to profitability is the topic on Bowen Coking Coal's investors mind, we've decided to gauge market sentiment. 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 Bowen Coking Coal
According to the 2 industry analysts covering Bowen Coking Coal, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$127m in 2023. The company is therefore projected to breakeven around a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 16%, which is relatively reasonable. However, if this rate turns out to be too buoyant, the company may become profitable later than analysts predict.
Given this is a high-level overview, we won’t go into details of Bowen Coking Coal's upcoming projects, though, keep in mind that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, a double-digit growth rate is not abnormal as the company is beginning to reap the benefits of earlier investments.
Before we wrap up, there’s one issue worth mentioning. Bowen Coking Coal currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Bowen Coking Coal's case is 50%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
Next Steps:
There are key fundamentals of Bowen Coking Coal 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 Bowen Coking Coal, take a look at Bowen Coking Coal's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:
Valuation: What is Bowen Coking Coal 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 Bowen Coking Coal 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 Bowen Coking Coal’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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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