We feel now is a pretty good time to analyse Energean plc's (LON:ENOG) business as it appears the company may be on the cusp of a considerable accomplishment. Energean plc engages in the exploration, development, and production of oil and gas. The UK£2.1b market-cap company announced a latest loss of US$96m on 31 December 2021 for its most recent financial year result. Many investors are wondering about the rate at which Energean will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
See our latest analysis for Energean
Consensus from 8 of the British Oil and Gas analysts is that Energean is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$140m in 2022. So, the company is predicted to breakeven approximately a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 45% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Energean's growth isn’t the focus of this broad overview, but, bear in mind 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 Energean is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Energean, so if you are interested in understanding the company at a deeper level, take a look at Energean's company page on Simply Wall St. We've also put together a list of key aspects you should further examine:
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Valuation: What is Energean 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 Energean is currently mispriced by the market.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Energean’s board and the CEO’s background.
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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.