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We feel now is a pretty good time to analyse Range Resources Corporation's (NYSE:RRC) business as it appears the company may be on the cusp of a considerable accomplishment. Range Resources Corporation operates as an independent natural gas, natural gas liquids (NGLs), and oil company in the United States. The US$2.1b market-cap company announced a latest loss of US$712m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is Range Resources' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Range Resources is bordering on breakeven, according to the 16 American Oil and Gas analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$281m in 2021. Therefore, the company is expected to breakeven roughly 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 93%, which is extremely buoyant. 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 Range Resources' upcoming projects, though, bear in mind that by and large 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.
One thing we would like to bring into light with Range Resources is its debt-to-equity ratio of 188%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of Range Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – Range Resources' company page on Simply Wall St. We've also put together a list of important aspects you should look at:
Valuation: What is Range 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 Range 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 Range 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.
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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