Precision Drilling Corporation's (TSE:PD): Precision Drilling Corporation, an oilfield services company, provides oil and natural gas drilling and related services and products. The CA$564m market-cap posted a loss in its most recent financial year of -CA$294.3m and a latest trailing-twelve-month loss of -CA$190.6m shrinking the gap between loss and breakeven. Many investors are wondering the rate at which PD will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for PD’s growth and when analysts expect the company to become profitable.
According to the 17 industry analysts covering PD, the consensus is breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of CA$99m in 2022. Therefore, PD is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which PD must grow year-on-year. It turns out an average annual growth rate of 27% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, PD may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of PD’s upcoming projects, but, bear in mind that by and large energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. PD currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in PD’s case is 97%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of PD to cover in one brief article, but the key fundamentals for the company can all be found in one place – PD’s company page on Simply Wall St. I’ve also put together a list of key factors you should look at:
- Valuation: What is PD 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 PD 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 Precision Drilling’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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