Goodrich Petroleum Corporation’s (AMEX:GDP): Goodrich Petroleum Corporation, an independent oil and natural gas company, engages in the exploration, development, and production of oil and natural gas. On 31 December 2017, the US$119.62M market-cap posted a loss of -US$8.00M for its most recent financial year. The most pressing concern for investors is GDP’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for GDP’s growth and when analysts expect the company to become profitable.
Expectation from analysts is GDP is on the verge of breakeven. They expect the company to post a final loss in 2017, before turning a profit of US$7.33M in 2018. GDP is therefore projected to breakeven around a couple of months from now! In order to meet this breakeven date, I calculated the rate at which GDP must grow year-on-year. It turns out an average annual growth rate of 87.92% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for GDP given that this is a high-level summary, though, take into account 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.
Before I wrap up, there’s one issue worth mentioning. GDP currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in GDP’s case is 99.07%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on GDP, so if you are interested in understanding the company at a deeper level, take a look at GDP’s company page on Simply Wall St. I’ve also compiled a list of essential aspects you should further examine:
- Historical Track Record: What has GDP’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 Goodrich Petroleum’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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.