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Senex Energy Limited’s (ASX:SXY) Path To Profitability

Senex Energy Limited’s (ASX:SXY): Senex Energy Limited explores, develops, and produces oil and gas resources in Australia. The AU$659.17m market-cap posted a loss in its most recent financial year of -AU$22.66m and a latest trailing-twelve-month loss of -AU$96.17m leading to an even wider gap between loss and breakeven. Many investors are wondering the rate at which SXY will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for SXY’s growth and when analysts expect the company to become profitable.

See our latest analysis for Senex Energy

SXY is bordering on breakeven, according to Oil and Gas analysts. They expect the company to post a final loss in 2018, before turning a profit of AU$24.23m in 2019. So, SXY is predicted to breakeven approximately a few months from now. How fast will SXY have to grow each year in order to reach the breakeven point by 2019? Working backwards from analyst estimates, it turns out that they expect the company to grow 99.45% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, SXY may become profitable much later than analysts predict.

ASX:SXY Past Future Earnings August 21st 18
ASX:SXY Past Future Earnings August 21st 18

Given this is a high-level overview, I won’t go into details of SXY’s upcoming projects, though, keep in mind 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.

Before I wrap up, there’s one aspect worth mentioning. SXY currently has no debt on its balance sheet, which is quite unusual for a cash-burning oil and gas company, which usually has a high level of debt relative to its equity. This means that SXY has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

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

  1. Historical Track Record: What has SXY’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Senex 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.

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 editorial-team@simplywallst.com.

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