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When Will Cooper Energy Limited (ASX:COE) Turn A Profit?

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·3-min read
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With the business potentially at an important milestone, we thought we'd take a closer look at Cooper Energy Limited's (ASX:COE) future prospects. Cooper Energy Limited, an upstream oil and gas exploration and production company, engages in securing, finding, developing, producing, and selling of hydrocarbons to south-east Australia. The AU$432m market-cap company announced a latest loss of AU$30m on 30 June 2021 for its most recent financial year result. The most pressing concern for investors is Cooper Energy's 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.

Check out our latest analysis for Cooper Energy

According to the 9 industry analysts covering Cooper Energy, the consensus is that breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of AU$14m in 2023. Therefore, the company is expected to breakeven roughly 2 years 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 89%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of Cooper Energy's upcoming projects, however, take into account that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Cooper Energy currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Cooper Energy's case is 67%. 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 key fundamentals of Cooper Energy which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Cooper Energy, take a look at Cooper Energy's company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

  1. Valuation: What is Cooper Energy 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 Cooper Energy 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 Cooper Energy’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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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