Targa Resources Corp.’s (NYSE:TRGP): Targa Resources Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of midstream energy assets in North America. With the latest financial year loss of -US$119.3m and a trailing-twelve month of -US$326.8m, the US$9.6b market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which TRGP will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for TRGP’s growth and when analysts expect the company to become profitable.
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According to the 11 industry analysts covering TRGP, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$52m in 2020. So, TRGP is predicted to breakeven approximately a couple of months from now! How fast will TRGP have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, TRGP may become profitable much later than analysts predict.
NYSE:TRGP Past and Future Earnings, January 17th 2020
Underlying developments driving TRGP’s growth isn’t the focus of this broad overview, though, take into account that by and large 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 I would like to bring into light with TRGP is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in TRGP’s case is 82%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
There are key fundamentals of TRGP which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at TRGP, take a look at TRGP’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should look at:
- Valuation: What is TRGP 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 TRGP 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 Targa Resources’s board and the CEO’s back ground.
- 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.
If you spot an error that warrants correction, please contact the editor at [email protected]. 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. Simply Wall St has no position in the stocks mentioned.
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