Europa Oil & Gas (Holdings) plc (LON:EOG): Are Analysts Optimistic?

We feel now is a pretty good time to analyse Europa Oil & Gas (Holdings) plc's (LON:EOG) business as it appears the company may be on the cusp of a considerable accomplishment. Europa Oil & Gas (Holdings) plc, together with its subsidiaries, engages in the exploration, development, and production of oil and gas properties in the United Kingdom, Morocco, and Ireland. The UK£6.0m market-cap company announced a latest loss of UK£5.4m on 31 July 2020 for its most recent financial year result. Many investors are wondering about the rate at which Europa Oil & Gas (Holdings) 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.

View our latest analysis for Europa Oil & Gas (Holdings)

Expectations from some of the British Oil and Gas analysts is that Europa Oil & Gas (Holdings) is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of UK£300k in 2022. The company is therefore projected 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 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 145% 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.

We're not going to go through company-specific developments for Europa Oil & Gas (Holdings) given that this is a high-level summary, though, keep in mind that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. 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 The company has managed its capital judiciously, with debt making up 2.0% 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 Europa Oil & Gas (Holdings) to cover in one brief article, but the key fundamentals for the company can all be found in one place – Europa Oil & Gas (Holdings)'s company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:

1. Valuation: What is Europa Oil & Gas (Holdings) 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 Europa Oil & Gas (Holdings) 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 Europa Oil & Gas (Holdings)’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. 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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