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Cokal Limited (ASX:CKA) Is Expected To Breakeven In The Near Future

Cokal Limited (ASX:CKA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Cokal Limited engages in the identification and development of coal in Indonesia. With the latest financial year loss of US$7.1m and a trailing-twelve-month loss of US$7.9m, the AU$127m market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Cokal's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Cokal

Expectations from some of the Australian Metals and Mining analysts is that Cokal is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$14m in 2024. So, the company is predicted to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 56% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Cokal given that this is a high-level summary, but, take into account that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined 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.

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Before we wrap up, there’s one issue worth mentioning. Cokal currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are key fundamentals of Cokal 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 Cokal, take a look at Cokal's company page on Simply Wall St. We've also put together a list of essential factors you should further research:

  1. Valuation: What is Cokal 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 Cokal is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cokal’s board and the CEO’s background.

  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.

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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