Yahoo Finance AKITA Drilling Ltd.'s (TSE:AKT.A) Profit Outlook
With the business potentially at an important milestone, we thought we'd take a closer look at AKITA Drilling Ltd.'s (TSE:AKT.A) future prospects. AKITA Drilling Ltd. is an oil and gas drilling contractor in Canada and the United States. The CA$77m market-cap company posted a loss in its most recent financial year of CA$21m and a latest trailing-twelve-month loss of CA$18m shrinking the gap between loss and breakeven. The most pressing concern for investors is AKITA Drilling'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 AKITA Drilling
According to the 2 industry analysts covering AKITA Drilling, the consensus is that breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of CA$4.0m in 2023. So, the company is predicted to breakeven just over a year from now. 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 158% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving AKITA Drilling's growth isn’t the focus of this broad overview, though, keep in mind that generally 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.
One thing we would like to bring into light with AKITA Drilling is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in AKITA Drilling's case is 76%. 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 key fundamentals of AKITA Drilling which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at AKITA Drilling, take a look at AKITA Drilling's company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:
Valuation: What is AKITA Drilling 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 AKITA Drilling 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 AKITA Drilling’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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