Nabors Industries Ltd’s (NYSE:NBR): Nabors Industries Ltd. provides drilling and drilling-related services and technologies for land-based and offshore oil and natural gas wells. With the latest financial year loss of -US$490m and a trailing-twelve month of -US$554m, the US$1.8b market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which NBR will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for NBR’s growth and when analysts expect the company to become profitable.
NBR is bordering on breakeven, according to Energy Services analysts. They expect the company to post a final loss in 2019, before turning a profit of US$81m in 2020. Therefore, NBR is expected to breakeven roughly a few months from now. How fast will NBR 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 84% year-on-year, on average, 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 NBR given that this is a high-level summary, 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. 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. NBR currently has a debt-to-equity ratio of 118%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in NBR’s case, it has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of NBR to cover in one brief article, but the key fundamentals for the company can all be found in one place – NBR’s company page on Simply Wall St. I’ve also compiled a list of key aspects you should look at:
- Valuation: What is NBR 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 NBR 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 Nabors Industries’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 past 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. For errors that warrant correction please contact the editor at email@example.com.