Vallourec S.A. (EPA:VK) About To Shift From Loss To Profit

By
Simply Wall St
Published
October 18, 2021
ENXTPA:VK
Source: Shutterstock

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.

See our latest analysis for Vallourec

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.

earnings-per-share-growth
ENXTPA:VK Earnings Per Share Growth October 19th 2021

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.

Next Steps:

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:

  1. 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.
  2. 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.
  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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.