Challenger Energy Group PLC (LON:CEG) On The Verge Of Breaking Even
We feel now is a pretty good time to analyse Challenger Energy Group PLC's (LON:CEG) business as it appears the company may be on the cusp of a considerable accomplishment. Challenger Energy Group PLC engages in the development, production, appraisal, and exploration of oil and gas properties. The UK£8.7m market-cap company posted a loss in its most recent financial year of US$14m and a latest trailing-twelve-month loss of US$24m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Challenger Energy Group 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 Challenger Energy Group
Challenger Energy Group is bordering on breakeven, according to some British Oil and Gas analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$18m in 2022. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 84% year-on-year, on average, 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.
Underlying developments driving Challenger Energy Group's growth isn’t the focus of this broad overview, though, bear in mind that generally 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.
One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 1.1% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Challenger Energy Group, so if you are interested in understanding the company at a deeper level, take a look at Challenger Energy Group's company page on Simply Wall St. We've also put together a list of pertinent factors you should look at:
Historical Track Record: What has Challenger Energy Group'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.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Challenger Energy Group'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.
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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