Yahoo Finance Market Sentiment Around Loss-Making Sundance Energy Australia Limited (ASX:SEA)
Sundance Energy Australia Limited’s (ASX:SEA): Sundance Energy Australia Limited engages in the exploration, development, and production of oil and natural gas in the United States. The US$521.94m market-cap posted a loss in its most recent financial year of -US$22.43m and a latest trailing-twelve-month loss of -US$40.51m leading to an even wider gap between loss and breakeven. Many investors are wondering the rate at which SEA 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 SEA, its year of breakeven and its implied growth rate.
View our latest analysis for Sundance Energy Australia
SEA is bordering on breakeven, according to Oil and Gas analysts. They expect the company to post a final loss in 2018, before turning a profit of US$63.65m in 2019. So, SEA is predicted to breakeven approximately a few months from now. How fast will SEA have to grow each year in order to reach the breakeven point by 2019? Working backwards from analyst estimates, it turns out that they expect the company to grow 100.38% 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.
I’m not going to go through company-specific developments for SEA given that this is a high-level summary, though, keep in mind that by and large an oil and gas 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 issue worth mentioning. SEA currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in SEA’s case is 90.22%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on SEA, so if you are interested in understanding the company at a deeper level, take a look at SEA’s company page on Simply Wall St. I’ve also compiled a list of key factors you should further research:
Valuation: What is SEA 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 SEA 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 Sundance Energy Australia’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
