Spectrum ASA’s (OB:SPU): Spectrum ASA produces and sells multi-client seismic surveys and seismic data imaging for multi-client survey and proprietary customers in the oil and gas market. On 31 December 2017, the ØRE2.34B market-cap posted a loss of -US$26.84M for its most recent financial year. The most pressing concern for investors is SPU’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for SPU, its year of breakeven and its implied growth rate.See our latest analysis for Spectrum
Expectation from analysts is SPU is on the verge of breakeven. They expect the company to post a final loss in 2017, before turning a profit of US$21.33M in 2018. So, SPU is predicted to breakeven approximately a couple of months from now! In order to meet this breakeven date, I calculated the rate at which SPU must grow year-on-year. It turns out an average annual growth rate of 64.20% is expected, which is rather optimistic! If this rate turns out to be too aggressive, SPU may become profitable much later than analysts predict.
Underlying developments driving SPU’s growth isn’t the focus of this broad overview, but, keep in mind that typically an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I’d like to point out is that SPU has managed its capital judiciously, with debt making up 16.46% of equity. This means that SPU has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
There are too many aspects of SPU to cover in one brief article, but the key fundamentals for the company can all be found in one place – SPU’s company page on Simply Wall St. I’ve also compiled a list of relevant factors you should further examine:
- Valuation: What is SPU 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 SPU is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Spectrum’s board and the CEO’s back ground.
- 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.