Nabors Industries Ltd.’s (NYSE:NBR): Nabors Industries Ltd. provides drilling and drilling-related services and technologies for land-based and offshore oil and natural gas wells. On 31 December 2018, the US$1.3b market-cap posted a loss of -US$651.5m for its most recent financial year. Many investors are wondering the rate at which NBR will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for NBR’s growth and when analysts expect the company to become profitable.
Consensus from the 21 Energy Services analysts is NBR is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$74m in 2021. NBR is therefore projected to breakeven around 2 years from today. How fast will NBR have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 92% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, NBR may become profitable much later than analysts predict.
Underlying developments driving NBR’s growth isn’t the focus of this broad overview, but, keep in mind that generally an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before I wrap up, there’s one issue worth mentioning. NBR currently has a debt-to-equity ratio of 114%. Typically, debt shouldn’t exceed 40% of your equity, and NBR has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of NBR to cover in one brief article, but the key fundamentals for the company can all be found in one place – NBR’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further examine:
- Valuation: What is NBR 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 NBR 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 Nabors Industries’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.
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