Yahoo Finance Karoon Energy Ltd (ASX:KAR): Are Analysts Optimistic?
Karoon Energy Ltd's (ASX:KAR): Karoon Energy Ltd operates as an oil and gas exploration company in Australia, Brazil, and Peru. With the latest financial year loss of -AU$28.4m and a trailing-twelve month of -AU$37.7m, the AU$290m market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which KAR will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for KAR, its year of breakeven and its implied growth rate.
View our latest analysis for Karoon Energy
KAR is bordering on breakeven, according to the 3 Oil and Gas analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$4.0m in 2021. KAR is therefore projected to breakeven around a couple of months from now! What rate will KAR have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 123%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving KAR’s growth isn’t the focus of this broad overview, but, 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.
Before I wrap up, there’s one aspect worth mentioning. KAR currently has no debt on its balance sheet, which is quite unusual for a cash-burning oil and gas company, which typically has high debt relative to its equity. This means that KAR has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on KAR, so if you are interested in understanding the company at a deeper level, take a look at KAR’s company page on Simply Wall St. I’ve also compiled a list of relevant factors you should look at:
Valuation: What is KAR 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 KAR 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 Karoon Energy’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.
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.
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