Arrow Exploration Corp.’s path to profitability (CVE: AXL)
We think now is the right time to analyze Arrow Exploration Corp. (CVE: AXL) because it looks like the company is on the cusp of a huge accomplishment. 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 C $ 8.9 million market-capitalization company recorded a loss in its last year of US $ 32 million and a last year-over-year loss of US $ 11 million, thereby narrowing the gap between the loss and breakeven point. The most pressing concern for investors is Arrow Exploration’s path to profitability – when will it break even? Below, we’ll provide a high-level summary of industry analyst expectations for the company.
Check out our latest analysis for Arrow Exploration
Arrow Exploration is close to equilibrium, according to some analysts at Canadian Oil and Gas. They predict that the company will suffer one final loss in 2021, before generating positive profits of US $ 3.4 million in 2022. Thus, the company is expected to break even in just over a year. How fast will the business need to grow each year to break even by 2022? Looking back at analysts’ estimates, it turns out that they expect an average growth of 157% year over year, which is pretty optimistic! If this rate turns out to be too aggressive, the company could become profitable much later than analysts predict.
We are not going to go over company specific developments for Arrow Exploration as this is a high level summary, however, keep in mind that an energy company usually has flows. lumpy cash flow that depends on the natural resource and the stage at which the business is operating. This means that the great growth rates to come are not abnormal, as the business begins to reap the rewards of past investments.
Before concluding, there is one problem worth mentioning. Arrow Exploration currently has a relatively high level of debt. As a general rule of thumb, debt should not exceed 40% of your equity, which in the case of Arrow Exploration is 55%. A higher level of debt requires tighter capital management, which increases the risk of investing in the loss-making business.
This article is not intended to be a full analysis on Arrow Exploration, so if you want to understand the business on a deeper level, take a look at the Arrow Exploration company page on Simply Wall St. We. have also compiled a list of aspects that you should dig deeper into:
- Evaluation: What is Arrow Exploration worth today? Has the potential for future growth already been factored into the price? The intrinsic value infographic in our free research report helps to visualize whether Arrow Exploration is currently being poorly valued by the market.
- Management team: An experienced management team at the helm increases our confidence in the company – take a look at the members of the Arrow Exploration board of directors and the CEO’s background.
- Other high performing stocks: Are there other stocks that offer better prospects with a proven track record? Check out our free list of these great stocks here.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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