Stock Analysis

Analysts Expect Breakeven For MMA Offshore Limited (ASX:MRM) Before Long

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ASX:MRM
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We feel now is a pretty good time to analyse MMA Offshore Limited's (ASX:MRM) business as it appears the company may be on the cusp of a considerable accomplishment. MMA Offshore Limited provides marine logistics and marine services to the offshore oil and gas industry in Australia and internationally. On 30 June 2020, the AU$129m market-cap company posted a loss of AU$94m for its most recent financial year. As path to profitability is the topic on MMA Offshore's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for MMA Offshore

According to the 2 industry analysts covering MMA Offshore, the consensus is that breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of AU$16m in 2023. The company is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 127% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
ASX:MRM Earnings Per Share Growth January 15th 2021

Given this is a high-level overview, we won’t go into details of MMA Offshore's upcoming projects, however, take into account 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 MMA Offshore is its debt-to-equity ratio of 119%. Generally, the rule of thumb is 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 in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on MMA Offshore, so if you are interested in understanding the company at a deeper level, take a look at MMA Offshore's company page on Simply Wall St. We've also put together a list of key factors you should look at:

  1. Valuation: What is MMA Offshore 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 MMA Offshore 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 MMA Offshore’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.

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