PGS ASA's (OB:PGS) Shift From Loss To Profit

PGS ASA's (OB:PGS): PGS ASA operates as a marine geophysical company. With the latest financial year loss of -US$87.9m and a trailing-twelve month of -US$172.8m, the kr4.1b market-cap amplifies its loss by moving further away from its breakeven target. As path to profitability is the topic on PGS’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for PGS’s growth and when analysts expect the company to become profitable.

See our latest analysis for PGS

PGS is bordering on breakeven, according to the 13 Energy Services analysts. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$93m in 2020. PGS is therefore projected to breakeven around a couple of months from now! How fast will PGS have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 92% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving PGS’s growth isn’t the focus of this broad overview, though, bear in mind that typically oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing I would like to bring into light with PGS is its debt-to-equity ratio of 185%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in PGS’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on PGS, so if you are interested in understanding the company at a deeper level, take a look at PGS’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should further research:

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 back ground.
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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.