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We feel now is a pretty good time to analyse Crescent Point Energy Corp.'s (TSE:CPG) business as it appears the company may be on the cusp of a considerable accomplishment. Crescent Point Energy Corp. explores, develops, and produces light and medium crude oil and natural gas reserves in Western Canada and the United States. The CA$890m market-cap company posted a loss in its most recent financial year of CA$1.0b and a latest trailing-twelve-month loss of CA$3.4b leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Crescent Point Energy will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
According to the 5 industry analysts covering Crescent Point Energy, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of CA$21m 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 77%, 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.
We're not going to go through company-specific developments for Crescent Point Energy given that this is a high-level summary, however, bear in mind that generally 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. Crescent Point Energy currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Crescent Point Energy's case is 83%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of Crescent Point Energy to cover in one brief article, but the key fundamentals for the company can all be found in one place – Crescent Point Energy's company page on Simply Wall St. We've also put together a list of pertinent factors you should further research:
Valuation: What is Crescent Point 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 Crescent Point 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 Crescent Point 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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