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With the business potentially at an important milestone, we thought we'd take a closer look at CNX Resources Corporation's (NYSE:CNX) future prospects. CNX Resources Corporation, an independent oil and natural gas company, acquires, explores for, develops, and produces natural gas properties primarily in the Appalachian Basin. On 31 December 2021, the US$3.0b market-cap company posted a loss of US$499m for its most recent financial year. Many investors are wondering about the rate at which CNX Resources 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.
Consensus from 8 of the American Oil and Gas analysts is that CNX Resources is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$388m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 52% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for CNX Resources given that this is a high-level summary, however, take into account that generally an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing we would like to bring into light with CNX Resources is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in CNX Resources' case is 60%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of CNX Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – CNX Resources' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:
Valuation: What is CNX Resources 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 CNX Resources 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 CNX Resources’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.
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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.