- Energy Services
Analysts Expect Source Energy Services Ltd. (TSE:SHLE) To Breakeven Soon
With the business potentially at an important milestone, we thought we'd take a closer look at Source Energy Services Ltd.'s (TSE:SHLE) future prospects. Source Energy Services Ltd. produces, supplies, and distributes Northern White frac sand used primarily in oil and gas exploration and production in Western Canada and the United States. The CA$41m market-cap company announced a latest loss of CA$8.8m on 31 December 2022 for its most recent financial year result. The most pressing concern for investors is Source Energy Services' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
See our latest analysis for Source Energy Services
According to the 2 industry analysts covering Source Energy Services, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of CA$23m in 2023. So, the company is predicted to breakeven approximately 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 87% 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.
We're not going to go through company-specific developments for Source Energy Services given that this is a high-level summary, however, keep in mind that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with Source Energy Services is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are too many aspects of Source Energy Services to cover in one brief article, but the key fundamentals for the company can all be found in one place – Source Energy Services' company page on Simply Wall St. We've also put together a list of key factors you should further examine:
- Valuation: What is Source Energy Services 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 Source Energy Services is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Source Energy Services’s board and the CEO’s background.
- 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.
Valuation is complex, but we're helping make it simple.
Find out whether Source Energy Services is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
Source Energy Services
Source Energy Services Ltd. produces, supplies, and distributes Northern White frac sand used primarily in oil and gas exploration and production in Western Canada and the United States.
Undervalued with reasonable growth potential.