Analysts Are Optimistic We'll See A Profit From Mosman Oil and Gas Limited (LON:MSMN)

We feel now is a pretty good time to analyse Mosman Oil and Gas Limited's (LON:MSMN) business as it appears the company may be on the cusp of a considerable accomplishment. Mosman Oil and Gas Limited engages in the exploration, development, and production of oil and gas projects in Australia and the United States. On 30 June 2020, the UK£4.4m market-cap company posted a loss of AU$4.8m for its most recent financial year. As path to profitability is the topic on Mosman Oil and Gas' 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.

View our latest analysis for Mosman Oil and Gas

Expectations from some of the British Oil and Gas analysts is that Mosman Oil and Gas is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of AU$233k in 2021. 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 102%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Mosman Oil and Gas' growth isn’t the focus of this broad overview, however, 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 Mosman Oil and Gas has no debt on its balance sheet, which is quite unusual for a cash-burning oil and gas company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Mosman Oil and Gas which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Mosman Oil and Gas, take a look at Mosman Oil and Gas' company page on Simply Wall St. We've also compiled a list of key factors you should further research:

1. Historical Track Record: What has Mosman Oil and Gas' performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Mosman Oil and Gas' 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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