Sanchez Midstream Partners LP (NYSEMKT:SNMP): When Will It Breakeven?

Sanchez Midstream Partners LP’s (AMEX:SNMP): Sanchez Midstream Partners LP engages in the acquisition, development, ownership, and operation of midstream and other energy-related assets in the United States. The US$183.18M market-cap company’s loss lessens since it announced a -US$40.71M bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -US$30.86M, as it approaches breakeven. Many investors are wondering the rate at which SNMP will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for SNMP, its year of breakeven and its implied growth rate.

Expectation from analysts is SNMP is on the verge of breakeven. They anticipate the company to incur a final loss in 2018, before generating positive profits of US$7.40M in 2019. SNMP is therefore projected to breakeven around a couple of months from now! How fast will SNMP have to grow each year in order to reach the breakeven point by 2019? Working backwards from analyst estimates, it turns out that they expect the company to grow 103.26% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, I won’t go into detail the detail of SNMP’s upcoming projects, however, keep in mind that typically an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one issue worth mentioning. SNMP currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in SNMP’s case is 60.26%. 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 SNMP to cover in one brief article, but the key fundamentals for the company can all be found in one place – SNMP’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further examine:

1. Valuation: What is SNMP 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 SNMP 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 Sanchez Midstream Partners’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.