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. The US$149m market-cap company announced a latest loss of -US$49.0m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on PES’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for PES’s growth and when analysts expect the company to become profitable.
According to the 8 industry analysts covering PES, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$4.0m in 2021. So, PES is predicted to breakeven approximately 2 years from now. How fast will PES have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 79% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, PES may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for PES given that this is a high-level summary, but, keep 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, and PES has considerably exceeded this. Note that a higher debt obligation increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on PES, so if you are interested in understanding the company at a deeper level, take a look at PES’s company page on Simply Wall St. I’ve also compiled a list of key aspects you should look at:
- 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.
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