We feel now is a pretty good time to analyse Petro Matad Limited's (FRA:HA3) business as it appears the company may be on the cusp of a considerable accomplishment. Petro Matad Limited, together with its subsidiaries, explores for, develops, and produces oil in Mongolia. The €22m market-cap company posted a loss in its most recent financial year of US$3.2m and a latest trailing-twelve-month loss of US$1.9m shrinking the gap between loss and breakeven. 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.
According to the 2 industry analysts covering Petro Matad, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$5.9m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 103% year-on-year, on average, which signals high confidence from analysts. 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 Petro Matad given that this is a high-level summary, however, take into account that typically an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we’d like to point out is that Petro Matad 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.
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 key factors you should further research:
- Valuation: What is Petro Matad 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 Petro Matad 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 Petro Matad’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.
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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.