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Golar LNG Limited's (NASDAQ:GLNG): Golar LNG Limited, a midstream liquefied natural gas (LNG) company, engages in the transportation, regasification, and liquefaction of LNG. The US$1.6b market-cap posted a loss in its most recent financial year of -US$231.4m and a latest trailing-twelve-month loss of -US$252.2m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is GLNG’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for GLNG.
According to the 11 industry analysts covering GLNG, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$121m in 2020. GLNG is therefore projected to breakeven around a few months from now. How fast will GLNG have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 93% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, GLNG may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of GLNG’s upcoming projects, though, bear in mind that by and large oil and gas 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 I would like to bring into light with GLNG is its debt-to-equity ratio of 140%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in GLNG’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are key fundamentals of GLNG which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at GLNG, take a look at GLNG’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should further examine:
- Valuation: What is GLNG 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 GLNG 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 Golar LNG’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 email@example.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.