Peninsula Energy Limited (ASX:PEN): Is Breakeven Near?
We feel now is a pretty good time to analyse Peninsula Energy Limited's (ASX:PEN) business as it appears the company may be on the cusp of a considerable accomplishment. Peninsula Energy Limited, together with its subsidiaries, engages in the exploration, development, and mining of uranium deposits in the United States. On 30 June 2022, the AU$163m market-cap company posted a loss of US$4.6m for its most recent financial year. As path to profitability is the topic on Peninsula Energy's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.
View our latest analysis for Peninsula Energy
Consensus from 3 of the Australian Oil and Gas analysts is that Peninsula Energy is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$3.1m in 2024. Therefore, the company is expected to breakeven roughly 2 years 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 85%, 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 Peninsula Energy given that this is a high-level summary, but, keep in mind that generally an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we’d like to point out is that Peninsula Energy 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. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
Next Steps:
This article is not intended to be a comprehensive analysis on Peninsula Energy, so if you are interested in understanding the company at a deeper level, take a look at Peninsula Energy's company page on Simply Wall St. We've also put together a list of key factors you should further examine:
Valuation: What is Peninsula Energy 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 Peninsula Energy 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 Peninsula Energy’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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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