When Can We Expect A Profit From Shelf Drilling, Ltd. (OB:SHLF)?
Shelf Drilling, Ltd.'s (OB:SHLF): Shelf Drilling, Ltd., through its subsidiaries, operates as a shallow water offshore drilling contractor in the Middle East, South East Asia, India, West Africa, and the Mediterranean. The øre3.8b market-cap company’s loss lessens since it announced a -US$145.8m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -US$116.4m, as it approaches breakeven. As path to profitability is the topic on SHLF’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for SHLF’s growth and when analysts expect the company to become profitable.
Check out our latest analysis for Shelf Drilling
SHLF is bordering on breakeven, according to the 3 Energy Services analysts. They expect the company to post a final loss in 2020, before turning a profit of US$54m in 2021. So, SHLF is predicted to breakeven approximately 2 years from today. What rate will SHLF have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 102%, which signals high confidence from analysts. If this rate turns out to be too aggressive, SHLF may become profitable much later than analysts predict.
Underlying developments driving SHLF’s growth isn’t the focus of this broad overview, however, take into account 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing I would like to bring into light with SHLF is its debt-to-equity ratio of 154%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in SHLF’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
Next Steps:
There are too many aspects of SHLF to cover in one brief article, but the key fundamentals for the company can all be found in one place – SHLF’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further research:
Valuation: What is SHLF 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 SHLF 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 Shelf Drilling’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.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
