Yahoo Finance Karoon Energy Ltd's (ASX:KAR) Path To Profitability
With the business potentially at an important milestone, we thought we'd take a closer look at Karoon Energy Ltd's (ASX:KAR) future prospects. Karoon Energy Ltd operates as an oil and gas exploration and production company in Australia, Brazil, and Peru. The AU$432m market-cap company announced a latest loss of AU$128m on 30 June 2020 for its most recent financial year result. Many investors are wondering about the rate at which Karoon Energy will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
View our latest analysis for Karoon Energy
According to the 3 industry analysts covering Karoon Energy, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of AU$12m in 2022. 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 115%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Karoon Energy's growth isn’t the focus of this broad overview, 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. 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 aspect worth mentioning. Karoon Energy 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 the company 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:
There are key fundamentals of Karoon 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 Karoon Energy, take a look at Karoon Energy's company page on Simply Wall St. We've also compiled a list of important factors you should look at:
Valuation: What is Karoon 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 Karoon Energy 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 background.
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. 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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