Loss-Making IOG plc (LON:IOG) Set To Breakeven

IOG plc (LON:IOG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. IOG plc engages in the exploration and development of oil and gas properties in the North Sea, the United Kingdom. The UK£11m market-cap company announced a latest loss of UK£28m on 31 December 2022 for its most recent financial year result. As path to profitability is the topic on IOG's investors mind, we've decided to gauge market sentiment. 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 IOG

According to the 2 industry analysts covering IOG, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of UK£41m in 2023. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 93%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of IOG's upcoming projects, but, 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. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before we wrap up, there’s one issue worth mentioning. IOG currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of IOG to cover in one brief article, but the key fundamentals for the company can all be found in one place – IOG's company page on Simply Wall St. We've also put together a list of important aspects you should further research:

1. Valuation: What is IOG 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 IOG 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 IOG’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. 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.