We feel now is a pretty good time to analyse Kosmos Energy Ltd.'s (NYSE:KOS) business as it appears the company may be on the cusp of a considerable accomplishment. Kosmos Energy Ltd., a deep-water independent oil and gas exploration and production company, focuses along the Atlantic Margins. On 31 December 2021, the US$3.0b market-cap company posted a loss of US$78m for its most recent financial year. The most pressing concern for investors is Kosmos Energy's path to profitability – when will it 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 Kosmos Energy

Consensus from 5 of the American Oil and Gas analysts is that Kosmos Energy is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$371m in 2022. So, the company is predicted to breakeven approximately 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 24%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Kosmos Energy's upcoming projects, however, keep in mind that typically an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. Kosmos Energy currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Kosmos 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 Kosmos Energy, take a look at Kosmos Energy's company page on Simply Wall St. We've also put together a list of important factors you should further research:

1. Valuation: What is Kosmos 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 Kosmos 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 Kosmos 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.

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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.