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Cooper Energy Limited (ASX:COE) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. 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$449m market-cap company posted a loss in its most recent financial year of AU$30m and a latest trailing-twelve-month loss of AU$13m shrinking the gap between loss and breakeven. The most pressing concern for investors is Cooper Energy's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Consensus from 10 of the Australian Oil and Gas analysts is that Cooper Energy is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$11m in 2023. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 96% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Cooper Energy's growth isn’t the focus of this broad overview, though, take into account that typically energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before we wrap up, there’s one issue worth mentioning. Cooper Energy currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Cooper Energy's case is 63%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Cooper Energy, so if you are interested in understanding the company at a deeper level, take a look at Cooper Energy's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:
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.
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.
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. 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.