With the business potentially at an important milestone, we thought we'd take a closer look at Europa Oil & Gas (Holdings) plc's (LON:EOG) future prospects. Europa Oil & Gas (Holdings) plc, together with its subsidiaries, engages in the exploration, development, and production of oil and gas properties in the United Kingdom, Morocco, and Ireland. On 31 July 2020, the UK£6.0m market-cap company posted a loss of UK£5.4m for its most recent financial year. Many investors are wondering about the rate at which Europa Oil & Gas (Holdings) will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to some industry analysts covering Europa Oil & Gas (Holdings), breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of UK£300k in 2022. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 145%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Europa Oil & Gas (Holdings)'s growth isn’t the focus of this broad overview, however, take into account that generally energy 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.
One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 2.0% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
There are too many aspects of Europa Oil & Gas (Holdings) to cover in one brief article, but the key fundamentals for the company can all be found in one place – Europa Oil & Gas (Holdings)'s company page on Simply Wall St. We've also put together a list of pertinent factors you should further research:
Valuation: What is Europa Oil & Gas (Holdings) 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 Europa Oil & Gas (Holdings) 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 Europa Oil & Gas (Holdings)’s board and the CEO’s background.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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