Armour Energy Limited (ASX:AJQ) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Armour Energy Limited, together with its subsidiaries, focuses on the discovery, development, and production of natural gas and associated liquid resources in Australia. The AU$46m market-cap company announced a latest loss of AU$12m on 30 June 2021 for its most recent financial year result. Many investors are wondering about the rate at which Armour Energy will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Armour Energy is bordering on breakeven, according to some Australian Oil and Gas analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$1.8m in 2022. So, the company is predicted to breakeven approximately 12 months 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 141% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Armour Energy's growth isn’t the focus of this broad overview, but, bear in mind that by and large energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, 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 issue worth mentioning. Armour Energy currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Armour Energy's case is 76%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of Armour Energy to cover in one brief article, but the key fundamentals for the company can all be found in one place – Armour Energy's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:
Historical Track Record: What has Armour Energy'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.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Armour Energy'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. 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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