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Noble Energy, Inc.'s (NYSE:NBL) Path To Profitability

Simply Wall St

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Noble Energy, Inc.'s (NYSE:NBL): Noble Energy, Inc., an independent energy company, engages in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids worldwide. The company’s loss has recently broadened since it announced a -US$66.0m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$933.0m, moving it further away from breakeven. As path to profitability is the topic on NBL’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for NBL’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Noble Energy

NBL is bordering on breakeven, according to the 18 Oil and Gas analysts. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$420m in 2020. NBL is therefore projected to breakeven around a couple of months from now! How fast will NBL 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 60% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, NBL may become profitable much later than analysts predict.

NYSE:NBL Past and Future Earnings, June 20th 2019

I’m not going to go through company-specific developments for NBL given that this is a high-level summary, however, take into account that by and large 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, 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 NBL is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in NBL’s case is 66%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on NBL, so if you are interested in understanding the company at a deeper level, take a look at NBL’s company page on Simply Wall St. I’ve also put together a list of key factors you should look at:

  1. Valuation: What is NBL 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 NBL is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Noble Energy’s board and the CEO’s back ground.
  3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.