Tsakos Energy Navigation Limited's (NYSE:TNP) Path To Profitability

We feel now is a pretty good time to analyse Tsakos Energy Navigation Limited's (NYSE:TNP) business as it appears the company may be on the cusp of a considerable accomplishment. Tsakos Energy Navigation Limited provides seaborne crude oil and petroleum product transportation services worldwide. The US$171m market-cap company announced a latest loss of US$15m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Tsakos Energy Navigation 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 Tsakos Energy Navigation

Tsakos Energy Navigation is bordering on breakeven, according to the 3 American Oil and Gas analysts. They expect the company to post a final loss in 2021, before turning a profit of US$97m in 2022. So, the company is predicted to breakeven just over a year from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 85%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Tsakos Energy Navigation given that this is a high-level summary, though, take into account that by and large an energy 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.

One thing we would like to bring into light with Tsakos Energy Navigation is its debt-to-equity ratio of 104%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company 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 Tsakos Energy Navigation, so if you are interested in understanding the company at a deeper level, take a look at Tsakos Energy Navigation's company page on Simply Wall St. We've also compiled a list of pertinent factors you should further research:

1. Valuation: What is Tsakos Energy Navigation 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 Tsakos Energy Navigation 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 Tsakos Energy Navigation’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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