Patterson-UTI Energy, Inc. (NASDAQ:PTEN) Has Found A Path To Profitability

·3 min read

Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Patterson-UTI Energy, Inc., through its subsidiaries, provides onshore contract drilling services to oil and natural gas operators in the United States and internationally. The US$3.3b market-cap company’s loss lessened since it announced a US$657m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$454m, as it approaches breakeven. Many investors are wondering about the rate at which Patterson-UTI Energy will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Patterson-UTI Energy

Patterson-UTI Energy is bordering on breakeven, according to the 12 American Energy Services analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$80m in 2022. So, the company is predicted to breakeven approximately 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 77% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving Patterson-UTI Energy's growth isn’t the focus of this broad overview, but, take into account 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.

One thing we would like to bring into light with Patterson-UTI Energy is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Patterson-UTI Energy's case is 56%. 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 Patterson-UTI Energy 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 Patterson-UTI Energy, take a look at Patterson-UTI Energy's company page on Simply Wall St. We've also put together a list of key aspects you should further research:

  1. Valuation: What is Patterson-UTI 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 Patterson-UTI Energy is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Patterson-UTI Energy’s board and the CEO’s background.

  3. 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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