Contango Oil & Gas Company’s (AMEX:MCF): Contango Oil & Gas Company, an independent oil and natural gas company, acquires, explores, develops, exploits, and produces crude oil and natural gas properties in the shallow waters of the Gulf of Mexico and onshore properties in Texas and Wyoming in the United States. The US$96.02M market-cap company announced a latest loss of -US$17.64M on 31 December 2017 for its most recent financial year result. As path to profitability is the topic on MCF’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for MCF, its year of breakeven and its implied growth rate.
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According to the industry analysts covering MCF, breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$1.00M in 2020. So, MCF is predicted to breakeven approximately 2 years from now. In order to meet this breakeven date, I calculated the rate at which MCF must grow year-on-year. It turns out an average annual growth rate of 46.07% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving MCF’s growth isn’t the focus of this broad overview, though, keep in mind that generally oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before I wrap up, there’s one aspect worth mentioning. MCF has managed its capital judiciously, with debt making up 38.01% of equity. This means that MCF has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
There are key fundamentals of MCF which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at MCF, take a look at MCF’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further examine:
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Historical Track Record: What has MCF’s 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.
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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 Contango Oil & Gas’s board and the CEO’s back ground.
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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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.