We feel now is a pretty good time to analyse Cadiz Inc.'s (NASDAQ:CDZI) business as it appears the company may be on the cusp of a considerable accomplishment. Cadiz Inc. operates as a natural resources development company in the United States. The US$117m market-cap company posted a loss in its most recent financial year of US$38m and a latest trailing-twelve-month loss of US$35m shrinking the gap between loss and breakeven. The most pressing concern for investors is Cadiz's 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.
According to some industry analysts covering Cadiz, breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$36m in 2024. So, the company is predicted to breakeven approximately 2 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 65%, which is rather optimistic! 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 Cadiz given that this is a high-level summary, though, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. Cadiz currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Cadiz's case is 98%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are key fundamentals of Cadiz 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 Cadiz, take a look at Cadiz's company page on Simply Wall St. We've also put together a list of pertinent factors you should further examine:
- Valuation: What is Cadiz 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 Cadiz 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 Cadiz’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.
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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.
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