Warrego Energy Limited's (ASX:WGO) Shift From Loss To Profit

Warrego Energy Limited (ASX:WGO) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Warrego Energy Limited engages in the exploration and development of oil and gas properties. The AU$159m market-cap company posted a loss in its most recent financial year of AU$6.1m and a latest trailing-twelve-month loss of AU$5.4m shrinking the gap between loss and breakeven. The most pressing concern for investors is Warrego 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.

See our latest analysis for Warrego Energy

Consensus from 2 of the Australian Oil and Gas analysts is that Warrego Energy is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$11m in 2024. Therefore, the company is expected to breakeven roughly 2 years from now. 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 97%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth

We're not going to go through company-specific developments for Warrego Energy given that this is a high-level summary, though, bear in mind 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.

One thing we’d like to point out is that Warrego Energy has no debt on its balance sheet, which is rare for a loss-making oil and gas company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of Warrego 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 Warrego Energy, take a look at Warrego Energy's company page on Simply Wall St. We've also put together a list of important factors you should further research:

1. Historical Track Record: What has Warrego Energy's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Warrego 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.

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

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.

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