Challenger Energy Group PLC (LON:CEG): When Will It Breakeven?

By
Simply Wall St
Published
May 14, 2022
AIM:CEG
Source: Shutterstock

We feel now is a pretty good time to analyse Challenger Energy Group PLC's (LON:CEG) business as it appears the company may be on the cusp of a considerable accomplishment. Challenger Energy Group PLC engages in the development, production, appraisal, and exploration of oil and gas properties. The company’s loss has recently broadened since it announced a US$14m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$24m, moving it further away from breakeven. As path to profitability is the topic on Challenger Energy Group's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Challenger Energy Group

Expectations from some of the British Oil and Gas analysts is that Challenger Energy Group is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$2.7m in 2023. Therefore, the company is expected to breakeven just over a year from now. 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 122% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
AIM:CEG Earnings Per Share Growth May 14th 2022

Given this is a high-level overview, we won’t go into details of Challenger Energy Group's upcoming projects, though, keep in mind that by and large energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 1.1% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Challenger Energy Group to cover in one brief article, but the key fundamentals for the company can all be found in one place – Challenger Energy Group's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should look at:

  1. Valuation: What is Challenger Energy Group 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 Challenger Energy Group 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 Challenger Energy Group’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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