Vallourec S.A. (EPA:VK) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Vallourec S.A., through its subsidiaries, provides tubular solutions for oil and gas, industry, and power generation in Europe, North America, South America, Asia, the Middle East, and internationally. With the latest financial year loss of €1.2b and a trailing-twelve-month loss of €681m, the €1.7b market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Vallourec will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Consensus from 7 of the French Energy Services analysts is that Vallourec is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of €9.5m in 2021. The company is therefore projected to breakeven around a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 34% 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.
Underlying developments driving Vallourec's growth isn’t the focus of this broad overview, though, take into account that generally 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 would like to bring into light with Vallourec is its debt-to-equity ratio of 104%. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of Vallourec to cover in one brief article, but the key fundamentals for the company can all be found in one place – Vallourec's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:
- Valuation: What is Vallourec 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 Vallourec 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 Vallourec’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.
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.
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