Nine Energy Service Inc’s (NYSE:NINE): Nine Energy Service, Inc. operates as an onshore completion and production services provider that targets unconventional oil and gas resource development in North America. The US$645.68M market-cap posted a loss in its most recent financial year of -US$70.91M and a latest trailing-twelve-month loss of -US$63.62M shrinking the gap between loss and breakeven. As path to profitability is the topic on NINE’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for NINE.
NINE is bordering on breakeven, according to analysts. They expect the company to post a final loss in 2017, before turning a profit of US$30.82M in 2018. So, NINE is predicted to breakeven approximately a few months from now. What rate will NINE have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 111.43%, which is extremely buoyant. 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 NINE given that this is a high-level summary, however, take into account that typically oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing I would like to bring into light with NINE is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in NINE’s case is 75.86%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are key fundamentals of NINE 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 NINE, take a look at NINE’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further research:
- Valuation: What is NINE 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 NINE 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 Nine Energy Service’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.