Loss-Making Petro Matad Limited (FRA:HA3) Expected To Breakeven In The Medium-Term

Petro Matad Limited (FRA:HA3) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Petro Matad Limited, together with its subsidiaries, engages in the exploration, development, and production of oil in Mongolia. With the latest financial year loss of US$5.9m and a trailing-twelve-month loss of US$6.6m, the €30m market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Petro Matad's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Petro Matad

According to the 2 industry analysts covering Petro Matad, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of US$2.0m in 2025. So, the company is predicted to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 111%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Petro Matad's upcoming projects, though, bear in mind that typically 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. Petro Matad currently has no debt on its balance sheet, which is quite unusual for a cash-burning oil and gas company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

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

1. Historical Track Record: What has Petro Matad'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 Petro Matad'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.