Athabasca Oil Corporation’s (TSE:ATH) Profit Outlook

Athabasca Oil Corporation’s (TSE:ATH): Athabasca Oil Corporation engages in the exploration, development, and production of light and thermal oil resource plays in the Western Canadian Sedimentary Basin in Alberta, Canada. The company’s loss has recently broadened since it announced a -CA$209.4m loss in the full financial year, compared to the latest trailing-twelve-month loss of -CA$290.8m, moving it further away from breakeven. The most pressing concern for investors is ATH’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for ATH.

See our latest analysis for Athabasca Oil

According to the 3 industry analysts covering ATH, the consensus is breakeven is near. They expect the company to post a final loss in 2018, before turning a profit of CA$11m in 2019. Therefore, ATH is expected to breakeven roughly a few months from now. What rate will ATH have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 98%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

TSX:ATH Past Future Earnings December 7th 18
TSX:ATH Past Future Earnings December 7th 18

Underlying developments driving ATH’s growth isn’t the focus of this broad overview, however, take into account that typically 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.

One thing I’d like to point out is that ATH has managed its capital prudently, with debt making up 38% of equity. This means that ATH 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 too many aspects of ATH to cover in one brief article, but the key fundamentals for the company can all be found in one place – ATH’s company page on Simply Wall St. I’ve also put together a list of relevant aspects you should look at:

  1. Valuation: What is ATH 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 ATH 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 Athabasca Oil’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.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.