Pioneer Energy Services Corp’s (NYSE:PES): Pioneer Energy Services Corp. provides land-based drilling and production services to oil and gas exploration and production companies in the United States and Colombia. The US$241m market-cap posted a loss in its most recent financial year of -US$75m and a latest trailing-twelve-month loss of -US$47m shrinking the gap between loss and breakeven. Many investors are wondering the rate at which PES will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for PES, its year of breakeven and its implied growth rate.
According to the industry analysts covering PES, breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$10m in 2020. PES is therefore projected to breakeven around a few months from now. What rate will PES 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 85%, which is rather optimistic! 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 PES given that this is a high-level summary, though, bear in mind that by and large oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I would like to bring into light with PES is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in PES’s case, it has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are too many aspects of PES to cover in one brief article, but the key fundamentals for the company can all be found in one place – PES’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should further research:
- Valuation: What is PES 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 PES 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 Pioneer Energy Services’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.