PGS ASA (OB:PGS) On The Verge Of Breaking Even

With the business potentially at an important milestone, we thought we'd take a closer look at PGS ASA's (OB:PGS) future prospects. PGS ASA, together with its subsidiaries, operates as a marine geophysical company primarily in Norway. The kr7.6b market-cap company announced a latest loss of US$33m on 31 December 2022 for its most recent financial year result. The most pressing concern for investors is PGS' path to profitability – when will it breakeven? 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 PGS

Consensus from 5 of the Norwegian Energy Services analysts is that PGS is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of US$113m in 2023. So, the company is predicted to breakeven approximately a year 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 61%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving PGS' growth isn’t the focus of this broad overview, however, bear 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 would like to bring into light with PGS is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is PGS 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 PGS 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 PGS’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.