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We feel now is a pretty good time to analyse NexTier Oilfield Solutions Inc.'s (NYSE:NEX) business as it appears the company may be on the cusp of a considerable accomplishment. NexTier Oilfield Solutions Inc., through its subsidiaries, provides well completion and production services in various active and demanding basins. With the latest financial year loss of US$119m and a trailing-twelve-month loss of US$56m, the US$2.7b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is NexTier Oilfield Solutions' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to the 10 industry analysts covering NexTier Oilfield Solutions, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$185m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 62% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of NexTier Oilfield Solutions' upcoming projects, though, take into account that generally an energy 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.
One thing we would like to bring into light with NexTier Oilfield Solutions is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in NexTier Oilfield Solutions' case is 66%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on NexTier Oilfield Solutions, so if you are interested in understanding the company at a deeper level, take a look at NexTier Oilfield Solutions' company page on Simply Wall St. We've also compiled a list of important factors you should further research:
Valuation: What is NexTier Oilfield Solutions 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 NexTier Oilfield Solutions 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 NexTier Oilfield Solutions’s board and the CEO’s background.
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.