With the business potentially at an important milestone, we thought we'd take a closer look at Enviva Inc.'s (NYSE:EVA) future prospects. Enviva Inc. produces, processes, and sells utility-grade wood pellets. With the latest financial year loss of US$172m and a trailing-twelve-month loss of US$243m, the US$702m market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is Enviva's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Enviva

According to the 5 industry analysts covering Enviva, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$59m in 2025. Therefore, the company is expected to breakeven roughly 2 years from now. 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 82%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Enviva's growth isn’t the focus of this broad overview, though, bear in mind that typically an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. 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. Enviva currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Enviva 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 Enviva 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 Enviva’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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