Yahoo Finance Arrow Exploration Corp. (CVE:AXL) Is Expected To Breakeven In The Near Future
With the business potentially at an important milestone, we thought we'd take a closer look at Arrow Exploration Corp.'s (CVE:AXL) future prospects. Arrow Exploration Corp., a junior oil and gas company, engages in the acquisition, exploration, development, and production of oil and gas properties in Colombia and Western Canada. The CA$7.6m market-cap company’s loss lessened since it announced a US$32m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$11m, as it approaches breakeven. The most pressing concern for investors is Arrow Exploration's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Check out our latest analysis for Arrow Exploration
According to some industry analysts covering Arrow Exploration, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$3.4m in 2022. Therefore, the company is expected to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 157% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Arrow Exploration's growth isn’t the focus of this broad overview, though, take into account that typically 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 we wrap up, there’s one issue worth mentioning. Arrow Exploration currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Arrow Exploration's case is 55%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Arrow Exploration, so if you are interested in understanding the company at a deeper level, take a look at Arrow Exploration's company page on Simply Wall St. We've also compiled a list of key factors you should look at:
Valuation: What is Arrow Exploration 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 Arrow Exploration 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 Arrow Exploration’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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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