When Will Talon Energy Ltd. (ASX:TPD) Become Profitable?

With the business potentially at an important milestone, we thought we'd take a closer look at Talon Energy Ltd.'s (ASX:TPD) future prospects. Talon Energy Ltd. engages in the exploration and evaluation of oil and gas projects in Australia and Mongolia. The AU$129m market-cap company posted a loss in its most recent financial year of AU$13m and a latest trailing-twelve-month loss of AU$6.6m shrinking the gap between loss and breakeven. As path to profitability is the topic on Talon Energy'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.

See our latest analysis for Talon Energy

Expectations from some of the Australian Oil and Gas analysts is that Talon Energy is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of AU$17m in 2024. So, the company is predicted to breakeven just over a year 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 58% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Talon Energy's growth isn’t the focus of this broad overview, but, 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before we wrap up, there’s one aspect worth mentioning. Talon Energy currently has no debt on its balance sheet, which is rare for a loss-making oil and gas company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

This article is not intended to be a comprehensive analysis on Talon Energy, so if you are interested in understanding the company at a deeper level, take a look at Talon Energy's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further research:

1. Historical Track Record: What has Talon Energy'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.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Talon Energy'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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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.