With the business potentially at an important milestone, we thought we'd take a closer look at American Resources Corporation's (NASDAQ:AREC) future prospects. American Resources Corporation, together with its subsidiaries, extracts, processes, transports, and sells metallurgical coal to the steel and industrial industries. With the latest financial year loss of US$11m and a trailing-twelve-month loss of US$19m, the US$50m market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is American 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.

Check out our latest analysis for American Resources

Consensus from 2 of the American Oil and Gas analysts is that American Resources is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of US$3.1m in 2025. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 123% 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 American Resources given that this is a high-level summary, though, take into account 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we would like to bring into light with American Resources is it 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 American Resources 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 American Resources, take a look at American Resources' company page on Simply Wall St. We've also compiled a list of key aspects you should further examine:

1. Historical Track Record: What has American Resources' 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.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on American Resources' 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.

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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.