Yahoo Finance Loss-Making Paramount Resources Ltd. (TSE:POU) Set To Breakeven
With the business potentially at an important milestone, we thought we'd take a closer look at Paramount Resources Ltd.'s (TSE:POU) future prospects. Paramount Resources Ltd., an independent energy company, explores for, develops, produces, and markets natural gas, crude oil, and natural gas liquids in Canada. On 31 December 2020, the CA$1.5b market-cap company posted a loss of CA$23m for its most recent financial year. As path to profitability is the topic on Paramount Resources' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Check out our latest analysis for Paramount Resources
According to some industry analysts covering Paramount Resources, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of CA$41m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 115%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Paramount Resources given that this is a high-level summary, though, keep in mind that by and large energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before we wrap up, there’s one issue worth mentioning. Paramount Resources currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Paramount Resources' case is 41%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
Next Steps:
There are too many aspects of Paramount Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – Paramount Resources' company page on Simply Wall St. We've also compiled a list of key aspects you should further research:
Valuation: What is Paramount Resources 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 Paramount Resources 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 Paramount Resources’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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