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When Will Superior Energy Services, Inc. (NYSE:SPN) Become Profitable?

Simply Wall St

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Superior Energy Services, Inc.'s (NYSE:SPN): Superior Energy Services, Inc. provides oilfield services and equipment to oil and natural gas exploration and production companies in the United States, the Gulf of Mexico, and internationally. The US$125m market-cap company’s loss lessens since it announced a -US$857.4m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -US$845.1m, as it approaches breakeven. As path to profitability is the topic on SPN’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for SPN.

See our latest analysis for Superior Energy Services

Consensus from the 21 Energy Services analysts is SPN is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$39m in 2022. So, SPN is predicted to breakeven approximately 3 years from today. In order to meet this breakeven date, I calculated the rate at which SPN must grow year-on-year. It turns out an average annual growth rate of 55% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, SPN may become profitable much later than analysts predict.

NYSE:SPN Past and Future Earnings, July 19th 2019

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

Before I wrap up, there’s one issue worth mentioning. SPN currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in SPN’s case, it has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of SPN which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at SPN, take a look at SPN’s company page on Simply Wall St. I’ve also compiled a list of relevant factors you should look at:

  1. Valuation: What is SPN 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 SPN 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 Superior Energy Services’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.