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Targa Resources Corp.'s (NYSE:TRGP): Targa Resources Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of midstream energy assets in North America. With the latest financial year loss of -US$119.3m and a trailing-twelve month of -US$182.0m, the US$9.4b market-cap amplifies its loss by moving further away from its breakeven target. As path to profitability is the topic on TRGP’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for TRGP.
TRGP is bordering on breakeven, according to the 9 Oil and Gas analysts. They expect the company to post a final loss in 2019, before turning a profit of US$206m in 2020. Therefore, TRGP is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which TRGP must grow year-on-year. It turns out an average annual growth rate of 60% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of TRGP’s upcoming projects, however, bear in mind that typically an oil and gas 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 I would like to bring into light with TRGP is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in TRGP’s case is 99%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on TRGP, so if you are interested in understanding the company at a deeper level, take a look at TRGP’s company page on Simply Wall St. I’ve also put together a list of essential aspects you should look at:
- Valuation: What is TRGP 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 TRGP 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 Targa Resources’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 firstname.lastname@example.org. 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.