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Loss-Making Novonix Limited (ASX:NVX) Expected To Breakeven

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Novonix Limited's (ASX:NVX): Novonix Limited develops and supplies battery materials, equipment, and services to the lithium-ion battery market in North America. On 30 June 2019, the AU$63m market-cap posted a loss of -AU$26.1m for its most recent financial year. The most pressing concern for investors is NVX’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for NVX.

Check out our latest analysis for Novonix

According to the industry analysts covering NVX, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$9.8m in 2022. So, NVX is predicted to breakeven approximately 2 years from now. What rate will NVX have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 90%, which signals high confidence from analysts. If this rate turns out to be too aggressive, NVX may become profitable much later than analysts predict.

ASX:NVX Past and Future Earnings, January 15th 2020
ASX:NVX Past and Future Earnings, January 15th 2020

Underlying developments driving NVX’s growth isn’t the focus of this broad overview, however, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I would like to bring into light with NVX is its debt-to-equity ratio of 109%. Typically, debt shouldn’t exceed 40% of your equity, which in NVX’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of NVX to cover in one brief article, but the key fundamentals for the company can all be found in one place – NVX’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further research:

  1. Valuation: What is NVX 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 NVX 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 Novonix’s board and the CEO’s back ground.

  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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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