PHX Energy Services Corp’s (TSE:PHX) Shift From Loss To Profit

PHX Energy Services Corp’s (TSE:PHX): PHX Energy Services Corp., through its subsidiaries, provides horizontal and directional drilling technology and services to oil and natural gas producing companies in Canada, the United States, Albania, and Russia. The CA$166.1m market-cap company’s loss lessens since it announced a -CA$23.5m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -CA$10.3m, as it approaches breakeven. Many investors are wondering the rate at which PHX 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 PHX, its year of breakeven and its implied growth rate.

View our latest analysis for PHX Energy Services

According to the industry analysts covering PHX, breakeven is near. They expect the company to post a final loss in 2018, before turning a profit of CA$725.0k in 2019. So, PHX is predicted to breakeven approximately a couple of months from now! What rate will PHX 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 114%, which is rather optimistic! If this rate turns out to be too aggressive, PHX may become profitable much later than analysts predict.

TSX:PHX Past Future Earnings August 28th 18
TSX:PHX Past Future Earnings August 28th 18

Given this is a high-level overview, I won’t go into details of PHX’s upcoming projects, however, bear in mind that typically oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. 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 aspect worth mentioning. PHX has managed its capital prudently, with debt making up 8.4% of equity. This means that PHX 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:

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

  1. Valuation: What is PHX 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 PHX 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 PHX Energy Services’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.