Analysts Are Optimistic We'll See A Profit From San Leon Energy plc (LON:SLE)

By
Simply Wall St
Published
January 19, 2021
AIM:SLE

With the business potentially at an important milestone, we thought we'd take a closer look at San Leon Energy plc's (LON:SLE) future prospects. San Leon Energy plc, together with its subsidiaries, engages in the exploration and production of oil and gas properties. With the latest financial year loss of US$39m and a trailing-twelve-month loss of US$52m, the UK£110m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which San Leon Energy will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for San Leon Energy

San Leon Energy is bordering on breakeven, according to the 2 British Oil and Gas analysts. They expect the company to post a final loss in 2020, before turning a profit of US$78m in 2021. The company is therefore projected to breakeven around 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 63% is expected, 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:SLE Earnings Per Share Growth January 19th 2021

We're not going to go through company-specific developments for San Leon Energy given that this is a high-level summary, however, bear in mind that generally 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.

One thing we’d like to point out is that San Leon Energy 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. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of San Leon Energy 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 San Leon Energy, take a look at San Leon Energy's company page on Simply Wall St. We've also put together a list of pertinent factors you should further research:

  1. Historical Track Record: What has San Leon Energy's 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 San Leon Energy'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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